Bristol Myers Squibb: Scale, Science, and Execution

Bristol Myers Squibb is a global biopharmaceutical company and a leading player in the development of innovative medicines for serious diseases. Known for treatments in areas such as oncology, cardiovascular disease, and immunology, the company combines deep scientific expertise with a broad portfolio of both established and newer therapies. With a growing mix of next generation medicines, a strong pipeline across multiple therapeutic areas, and a focus on operational efficiency, Bristol Myers Squibb aims to drive long term growth while navigating patent expirations and pricing pressure. The question remains: Does this pharmaceutical giant deserve a spot in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these posts in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should mention that I do not own any shares in Bristol Myers Squibb at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Bristol Myers Squibb, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Bristol Myers Squibb was formed in 1989 through the merger of Bristol-Myers and Squibb and has grown into one of the largest biopharmaceutical companies in the world. The company focuses on discovering, developing, manufacturing, and commercializing innovative medicines for serious diseases, with a particular emphasis on oncology, hematology, immunology, cardiovascular conditions, and neuroscience. Its business model is built around identifying areas of high unmet medical need and developing therapies that can significantly improve patient outcomes. Bristol Myers Squibb combines the global scale, financial strength, and infrastructure of a large pharmaceutical company with a strategy that emphasizes scientific focus and innovation, similar to what is often seen in biotechnology companies. This approach allows the company to pursue both internal research and external opportunities through acquisitions, partnerships, and licensing agreements, helping it maintain a broad and evolving pipeline of potential new treatments. The company sells its medicines worldwide through wholesalers, distributors, specialty pharmacies, hospitals, and government agencies, supported by a global manufacturing and distribution network that ensures reliable supply across major markets. Its product portfolio includes a mix of established medicines that generate significant cash flow and newer therapies that are expected to drive future growth. Key products such as Eliquis, Opdivo, Yervoy, Orencia, Revlimid, and Pomalyst highlight the company’s presence across multiple therapeutic areas, while newer medicines and advanced platforms such as CAR-T cell therapies, biologics, and protein degraders reflect its focus on next-generation innovation. This combination of mature products and a growing pipeline allows Bristol Myers Squibb to balance near-term profitability with long-term growth opportunities. A central part of the company’s strategy is continuous investment in research and development, supported by both internal capabilities and external collaborations, which helps mitigate the inherent risks of drug development and ensures a steady flow of potential new products. Bristol Myers Squibb’s competitive moat is primarily built on intellectual property, scientific expertise, and global scale. Like most pharmaceutical companies, it benefits from patent protection and regulatory exclusivity, which provide temporary monopolies on its medicines and allow it to generate strong margins during the exclusivity period. These protections are essential because developing new drugs is both costly and time consuming, often taking more than a decade with a high risk of failure. However, the company’s moat extends beyond legal protections. It has built deep expertise across multiple therapeutic areas and drug modalities, including small molecules, biologics, and advanced therapies such as cell therapies. This scientific breadth makes it more difficult for competitors to replicate its capabilities, especially when combined with the company’s experience in running large-scale clinical trials and navigating complex regulatory processes. Another important advantage is its global manufacturing and commercial infrastructure, which allows it to produce and distribute complex therapies at scale while maintaining strong relationships with healthcare providers and payers. This infrastructure is particularly valuable in pharmaceuticals, where reliability, compliance, and access to markets are critical. In addition, Bristol Myers Squibb strengthens its moat through its ability to continuously refresh its product portfolio. As patents expire and older drugs face generic competition, the company relies on its pipeline, acquisitions, and partnerships to introduce new therapies that can replace declining revenue. This creates a cycle where successful innovation leads to strong cash flows, which are then reinvested into further research and development. While this type of moat requires constant renewal, Bristol Myers Squibb’s combination of intellectual property, scientific capabilities, global scale, and disciplined capital allocation provides a strong foundation for maintaining its competitive position over time.

Management

Chris Boerner serves as the CEO of Bristol Myers Squibb, a role he assumed in November 2023 after nearly a decade with the company. His appointment followed a period of significant transformation for Bristol Myers Squibb, and he brings a combination of internal experience and external industry perspective that positions him well to lead the company through its next phase. Since joining Bristol Myers Squibb in 2015, Chris Boerner has held several senior leadership roles, including Chief Commercialization Officer and Chief Operating Officer, where he was responsible for global commercial strategy and played a central role in the launch and lifecycle management of key medicines. His experience across both commercial execution and operational leadership has given him a comprehensive understanding of how to translate scientific innovation into commercial success across global markets. Before joining Bristol Myers Squibb, Chris Boerner held leadership roles at Seattle Genetics and Genentech, where he focused on oncology, one of the most competitive and innovation-driven areas within pharmaceuticals. During this time, he contributed to shaping commercial strategies for complex therapies in rapidly evolving markets, further strengthening his expertise in bringing novel treatments to patients. Earlier in his career, he worked at McKinsey & Company, advising healthcare clients on strategy and operations. This combination of consulting, biotech, and large pharmaceutical experience has provided him with a broad perspective on the industry, ranging from early-stage innovation to large-scale commercialization. Chris Boerner holds a BA in Economics and History from Washington University in St. Louis and earned both his MA and PhD in Business Administration from the Haas School of Business at the University of California, Berkeley. His academic background, combined with his industry experience, contributes to a leadership style that emphasizes analytical thinking, disciplined execution, and long-term strategic planning. In addition to his executive responsibilities, Chris Boerner serves on the Executive Committee of the Biotechnology Innovation Organization and is a member of the National Council for Arts and Sciences at Washington University, reflecting his engagement with both the healthcare ecosystem and the academic community. Since becoming CEO, Chris Boerner has outlined a clear strategic framework for Bristol Myers Squibb that is centered around navigating a near-term period of growth, managing a transition phase driven by upcoming patent expirations, and ultimately returning the company to sustainable top-tier growth. A key focus of his strategy is ensuring that the company successfully replaces revenue from aging products with new therapies from its pipeline and business development efforts. This includes maintaining strong execution in existing growth drivers while continuing to invest heavily in research and development and pursuing external innovation through partnerships and acquisitions. Another important aspect of Chris Boerner’s leadership is his emphasis on disciplined capital allocation and operational execution. He has highlighted the importance of balancing investment in innovation with shareholder returns, while also ensuring that the organization remains focused on productivity and efficiency. Given the inherent risks and long development timelines in the pharmaceutical industry, this balance is critical for sustaining long-term value creation. While his tenure as CEO is still relatively early, Chris Boerner benefits from having spent years inside the organization and having been closely involved in many of its most important commercial and strategic decisions. This continuity reduces execution risk during a period that is particularly important for the company, as it faces both significant opportunities from its pipeline and challenges related to patent expirations. Based on his track record, industry experience, and clearly articulated strategy, Chris Boerner appears well positioned to guide Bristol Myers Squibb through its next phase of development and to maintain its position as a leading global biopharmaceutical company.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Bristol Myers Squibb has had a more uneven ROIC profile compared to many other companies, with strong returns earlier in the period followed by a notable decline from 2019 to 2021 before recovering in recent years. The dip during that period was primarily driven by the acquisition of Celgene, which significantly increased the capital base while earnings took time to catch up. Large acquisitions in pharmaceuticals often work this way. The company invests heavily upfront, which temporarily lowers returns, and only later begins to see the full benefit as the acquired products contribute to earnings. This explains why ROIC dropped to low single digits in 2020 before gradually recovering. Since 2022, ROIC has moved back above 10% and has improved each year, reaching a high level again in 2025. This improvement reflects stronger profitability from newer products, cost efficiencies, and the gradual normalization after past acquisitions. It also shows that the company has been able to convert its investments into earnings over time, which is an important sign of quality in a pharmaceutical business. However, unlike companies with very stable business models, Bristol Myers Squibb’s ROIC is naturally more volatile because it depends on the success of its drug portfolio, the timing of patent expirations, and ongoing investments in research and development. Several structural factors explain both the strengths and the volatility in Bristol Myers Squibb’s ROIC. First, the company benefits from very high margins on successful drugs during their exclusivity period. When a medicine is protected from competition, it can generate significant earnings with relatively limited additional investment, which supports high returns on capital. This is why ROIC can reach levels close to 20% or higher in strong years. Second, the company operates in an industry that requires very large and continuous investment in research and development. These investments are necessary to create future products but can weigh on returns in the short term, especially when combined with acquisitions or pipeline investments that have not yet contributed meaningfully to earnings. Third, patent expirations play a major role. When a major drug loses exclusivity, revenue can decline quickly, which puts pressure on returns until new products take over. Looking ahead, it is reasonable to expect that ROIC can remain at healthy levels, but it is unlikely to move in a straight line or consistently stay above 20%. Bristol Myers Squibb is entering a period where some of its key products will face patent expirations, which could weigh on earnings and therefore on ROIC. At the same time, the company is investing heavily in its pipeline and in new growth drivers, which increases the capital base. These two factors together suggest that returns may fluctuate rather than continue rising each year. The key question is whether new products and pipeline assets can offset declining revenue from older drugs. Overall, the recent improvement in ROIC is encouraging and shows that past investments are starting to pay off. However, Bristol Myers Squibb’s business model means that returns on capital will likely remain somewhat cyclical. Periods of strong ROIC driven by successful products will often be followed by periods of lower returns as the company reinvests in the next generation of therapies. If the company continues to execute well on its pipeline and capital allocation, it should be able to maintain ROIC above 10% over time, even if it does not consistently return to the highest levels seen earlier in the decade.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Bristol Myers Squibb’s equity has been quite volatile over the past decade, with several years of sharp declines followed by periods of recovery. The most important reason for this pattern is the company’s capital allocation strategy rather than a deterioration in the underlying business. The large increase in equity in 2019 was driven by the acquisition of Celgene, which significantly increased the size of the company. However, in the years that followed, equity declined as the company worked through the effects of that deal. When a company makes a large acquisition, it often pays a premium for future growth, and this does not always show up as steady increases in equity over time. Instead, the balance sheet can move around as those investments are gradually reflected in earnings. Another important factor is that Bristol Myers Squibb has continued to actively manage its capital through acquisitions and share repurchases. When the company buys back its own shares, it uses cash, which directly reduces equity. This means that even if the business remains profitable, equity can decline simply because capital is being returned or redeployed. In addition, fluctuations in earnings also play a role. Years with weaker profitability, whether due to integration costs, patent expirations, or higher spending on developing new medicines, can lead to lower retained earnings and therefore lower equity. The sharp declines in some years, particularly after 2019, reflect a combination of these factors. The company became much larger through the Celgene acquisition, but at the same time it has been returning capital and investing heavily in future growth. This creates a situation where reported equity moves up and down depending on timing rather than steadily increasing each year. It is therefore important not to interpret declining equity in isolation as a sign of a weaker business, especially in a pharmaceutical company where large investments and acquisitions are part of the long-term strategy. The increase in equity in 2025 is a positive sign and likely reflects stronger profitability combined with a more stable period following earlier integration and investment phases. It suggests that the company is beginning to see more of the benefits from its past investments. However, it is unlikely that equity will now grow steadily every year. Bristol Myers Squibb operates in an industry where large deals, ongoing investment in new medicines, and changes in earnings can lead to continued fluctuations. Looking ahead, equity is likely to remain somewhat uneven rather than following a smooth upward trend. The company will continue to invest heavily in developing new treatments and may pursue additional acquisitions, both of which can affect equity in the short term. At the same time, if new products perform well and profitability remains strong, periods of equity growth like the one seen in 2025 can occur.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Bristol Myers Squibb has historically generated strong free cash flow and high free cash flow margins. This is largely a result of the company’s business model, which combines high-margin medicines with a relatively efficient cost structure once a drug is on the market. When a medicine is approved and protected from competition, it can generate significant cash with limited additional costs, which allows a large portion of revenue to be converted into free cash flow. Another important reason for the strong cash generation is that, while the company invests heavily in developing new medicines, these investments are spread over many years. Once a drug is approved, it often requires relatively limited ongoing spending compared to the revenue it generates. This creates a dynamic where periods of successful product launches and strong sales lead to very high cash generation. In addition, Bristol Myers Squibb benefits from its global scale, which allows it to leverage its commercial and manufacturing infrastructure across multiple products, further supporting strong margins and cash flow. The slight decline in free cash flow in 2025 compared to 2024 should be seen in context. Free cash flow remains at a high level, and the decrease is most likely related to timing rather than a change in the underlying business. In some years, more cash is tied up in inventories, payments from customers take longer to come in, or the company chooses to invest more in new medicines and future growth. These factors can reduce free cash flow in a given year, even if the business itself is performing well. The fact that margins remain strong suggests that the company’s ability to generate cash has not weakened. Looking ahead, Bristol Myers Squibb is expected to remain a strong generator of free cash flow, but it is unlikely to grow in a straight line every year. The company is entering a period where some of its key products will face increased competition, which can put pressure on revenue and cash flow. At the same time, it continues to invest heavily in new medicines to replace these products. This means that free cash flow may move up and down depending on the success of new launches and the level of investment in future growth. Bristol Myers Squibb uses its free cash flow in a balanced way. A large portion is reinvested into the business, particularly in developing new medicines, expanding the pipeline, and pursuing acquisitions or partnerships that can support future growth. The company has made it clear that business development remains a top priority. At the same time, it uses its cash flow to reduce debt from past acquisitions, which helps strengthen the company over time. Finally, the company returns a meaningful portion of its cash to shareholders through its dividend, which has been a consistent part of its strategy for many years. The free cash flow yield suggests that the stock is currently trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to investigate is debt. It is crucial to determine whether a business has a manageable level of debt that could reasonably be repaid within a three year period. To assess this, I divide the total long term debt by the company’s current earnings. Looking at Bristol Myers Squibb’s financials, the company currently has around 6 years of earnings in debt, which is higher than I would like to see. That said, the elevated debt level is largely the result of acquisitions, including its largest ever deal for Celgene as well as more recent acquisitions such as Karuna and RayzeBio. These types of deals are common in the pharmaceutical industry, where companies acquire new medicines and pipelines to support future growth. It is also important to note that the company has already started to address this. Management has been focused on reducing debt and has paid down a significant amount, completing around 10 billion in debt reduction ahead of schedule. In addition, Bristol Myers Squibb holds a large cash position, which provides further financial flexibility. This shows that while the debt level is higher than ideal, it is being actively managed. Overall, the debt is something to keep an eye on, but it has a clear explanation and does not appear to be a structural concern. If the company continues to reduce debt while maintaining strong cash generation, the debt level should become less of an issue over time.

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Risks

Increased pricing pressure is a risk for Bristol Myers Squibb. The company operates in an industry where the ability to set prices is becoming more restricted over time, both in the United States and internationally. Governments, insurance providers, and large purchasing organizations are all working to reduce healthcare costs, and prescription drugs are a major focus. This means that even if Bristol Myers Squibb develops highly effective medicines, it may not be able to charge the same prices as in the past or raise prices as freely as before. One of the most important developments is the growing role of government involvement in drug pricing, especially in the United States. New legislation allows the government to negotiate prices on certain medicines after they have been on the market for a number of years. This directly impacts some of Bristol Myers Squibb’s key products, such as Eliquis, Pomalyst, and Orencia, which are already being targeted for lower prices in the coming years. These changes can reduce revenue from existing products earlier than expected, even before they face generic competition. In addition, there are rules that require companies to provide rebates if they increase prices faster than inflation, which further limits pricing flexibility. Another source of pressure comes from insurance companies and pharmacy benefit managers, which act as gatekeepers for which medicines patients can access. These organizations negotiate aggressively with pharmaceutical companies and often demand discounts in exchange for placing a drug on their preferred lists. If a drug is not included on these lists, it can see significantly lower usage because patients may have to pay more out of pocket. This creates a competitive environment where companies are not only competing on the quality of their medicines but also on price. Outside the United States, pricing pressure is often even stronger. In many countries, governments play a direct role in setting or approving drug prices. This can lead to lower prices at launch and additional price cuts over time. Some countries also compare prices across markets and push for lower prices if they see differences. In addition, there can be delays before new medicines are approved for use, which limits how quickly companies can generate revenue from new products. These factors mean that Bristol Myers Squibb may face lower prices and slower market access in many international markets. There is also increasing pressure from public programs and policies that require companies to offer medicines at reduced prices to certain groups or healthcare providers. Over time, these programs have expanded, which means a larger share of sales may come at lower prices. At the same time, there is growing public and political scrutiny of drug pricing, which can lead to further regulation and limits on how companies price their products.

Competition is a risk for Bristol Myers Squibb because it operates in a highly dynamic and innovation driven industry where leadership is constantly challenged. The company competes with large global pharmaceutical companies as well as smaller, highly specialized biotech firms, all of which are working to develop better treatments. In many of its key areas such as oncology, immunology, and cardiovascular disease, competition is intense, and even small improvements in treatment outcomes can shift market share quickly. This means that Bristol Myers Squibb must continuously deliver strong clinical results to maintain its position. One of the clearest examples of this is in immuno oncology, where Opdivo competes directly with other leading therapies. In particular, competing drugs have managed to establish strong positions in several important cancer types, which has limited Opdivo’s growth potential in some areas. At the same time, new therapies and combination treatments are constantly being developed, which can further increase competition. As doctors gain access to more treatment options, they may choose alternatives that show better results, fewer side effects, or are easier for patients to use. Competition is not only about the quality of the medicine but also about how it is positioned in the market. Healthcare providers and insurance systems play a major role in determining which treatments are used. If a competing product is seen as more cost effective or receives better coverage, it can quickly gain market share. Even small differences in how a drug is perceived, whether in terms of effectiveness, safety, or convenience, can influence treatment decisions. In some cases, competitors may also benefit from stronger marketing efforts or better relationships with healthcare systems, which can further impact sales. Another challenge is that competition can affect pricing and volumes even before any loss of exclusivity. When multiple treatments are available for the same condition, companies may need to offer discounts or other incentives to maintain access and usage. This can reduce both revenue and profitability over time. In addition, regulatory decisions, such as updated safety labels or new usage guidelines, can influence how doctors prescribe certain treatments compared to competing options. The pace of innovation in the pharmaceutical industry also adds to the competitive risk. New scientific approaches such as cell therapies, gene based treatments, and targeted medicines are advancing rapidly. These innovations can change the standard of care and make existing treatments less relevant. Smaller biotech companies are often very focused on specific diseases and can move quickly, while larger competitors have the resources to invest heavily in new technologies. This creates an environment where Bristol Myers Squibb must constantly adapt to remain competitive.

Patent losses is a risk for Bristol Myers Squibb. The company’s business model depends heavily on being able to sell its medicines without direct competition for a period of time. During this period, it can charge higher prices and generate strong profits, which are needed to cover the high cost and risk of developing new drugs. However, once this protection ends, other companies can enter the market with similar products at much lower prices. When that happens, sales of the original drug often decline quickly and significantly. A clear example is Revlimid, which was one of the company’s most important products. After losing exclusivity, revenue declined sharply as lower priced alternatives entered the market. By 2025, Revlimid generated only around $1 billion in revenue, down from more than $12 billion at its peak. This illustrates how dramatic the impact can be when a major drug faces competition. What was once a key driver of earnings can quickly become far less important. This risk is not limited to older products. Several of Bristol Myers Squibb’s current key medicines are approaching similar points. Eliquis, one of the company’s largest drugs, is expected to face competition in the coming years, particularly in Europe starting in 2026. Management already expects a noticeable drop in sales as a result, with a step down of around $1,5 billion to $2 billion in the following year. Other important products such as Opdivo and Orencia are also expected to face similar challenges over time. When multiple large products face competition within a relatively short period, it can create a significant gap in revenue. Another challenge is that the timing of these losses is not always fully predictable. Competitors can challenge patents in court, and in some cases they succeed earlier than expected. In other situations, companies agree to settlements that allow competitors to enter the market before the original protection fully expires. In addition, some countries have weaker protection or policies that encourage faster use of lower priced alternatives. This means that Bristol Myers Squibb can face pressure on its products earlier or more aggressively than initially expected. The key issue is that replacing lost revenue is difficult. Developing new medicines takes many years, and there is always a risk that a drug in development will not succeed or will take longer than expected to reach the market. Even when a new product is approved, it may take time to build up sales to a level that can offset the decline from older drugs. This creates a constant need for successful innovation, where the company must keep bringing new products to market just to maintain its overall revenue.

Reasons to invest

The product portfolio is a reason to invest in Bristol Myers Squibb because the company has successfully built a more balanced and diversified mix of medicines that can support growth over time. In the past, the company relied heavily on a few large blockbuster drugs, but today a growing share of revenue is coming from newer products that are still early in their life cycles. This shift is important because it reduces dependence on older medicines and creates a stronger foundation for future growth. One of the most encouraging aspects is the strong momentum in the growth portfolio. These newer products are growing at a double digit rate and now represent a large share of total revenue. Several of them have already reached significant scale, with products like Reblozyl generating more than $2 billion in annual sales and others such as Opdualag, Breyanzi, and Camzyos each surpassing $1 billion. These are not small or early stage products. They are already meaningful contributors to the business, and at the same time they still have room to grow as they expand into new patient groups and additional markets. Another strength of the portfolio is its breadth across different types of treatments. Bristol Myers Squibb is not relying on a single type of medicine or a single disease area. Instead, it has built a portfolio that includes cancer treatments, cardiovascular drugs, immunology medicines, and newer areas such as cell therapies. This diversification matters because it reduces the risk that any one product or area will determine the company’s overall performance. It also allows the company to benefit from multiple growth opportunities at the same time. The newer products also appear to be gaining strong traction in the market. Many of them are seeing increasing adoption from doctors and patients, supported by positive clinical results and growing real world use. For example, newer launches have shown steady uptake and increasing use across hospitals and clinics, while others are becoming standard treatments in certain diseases. This type of adoption is important because it shows that the products are not only approved but are also being widely used in practice. Another important factor is the number of potential future catalysts within the portfolio. Several products are being studied for additional uses, which could expand their market over time. In addition, newer medicines are still in the early stages of their commercial journey, meaning that their full potential has not yet been realized. This creates a pipeline within the portfolio itself, where existing products can continue to grow without the company needing to rely entirely on brand new launches. It is also worth noting how the growth portfolio is already offsetting declines from older products. Even with a meaningful drop in revenue from legacy medicines, the newer products have been able to make up most of the difference. This is a key sign of strength, as it shows that the company is successfully replacing older revenue with new sources of growth.

The pipeline is a reason to invest in Bristol Myers Squibb because it represents the company’s future growth engine and its ability to replace older products with new, high value medicines. In the pharmaceutical industry, long term success depends on continuously bringing new treatments to market, and Bristol Myers Squibb has built a broad and active pipeline that spans multiple disease areas and treatment approaches. The company is currently entering a period with a high number of important data readouts, which will help determine the value of many of its future products. Management has described this as a data rich period, with the potential to introduce more than 10 new medicines and over 30 meaningful launch opportunities by 2030. This highlights the scale of the opportunity and shows that growth is not dependent on a single product but rather a large group of potential new therapies. One of the most important strengths of the pipeline is its breadth across different therapeutic areas. Bristol Myers Squibb is developing new treatments in oncology, cardiovascular disease, immunology, and neuroscience, which reduces reliance on any single area. For example, in cardiovascular disease, milvexian has the potential to become a next generation treatment that could improve safety compared to existing options. In immunology and pulmonary disease, admilparant is being developed as a potential new standard of care for serious lung conditions where current treatments are limited. At the same time, the company continues to build on its strong position in cancer treatment through multiple new programs, including advanced cell therapies and next generation immune based treatments. Another key strength is the focus on medicines that could offer clear improvements over existing treatments. Many of the pipeline candidates aim to be first in their class or best in their class, meaning they could either introduce a completely new way of treating a disease or significantly improve outcomes compared to current options. For instance, some of the company’s newer cancer programs are designed to combine multiple treatment mechanisms into a single therapy, which could make them more effective than existing treatments. In other cases, the goal is to improve safety or ease of use, which can be just as important for gaining adoption among doctors and patients. The pipeline is also supported by a large number of late stage studies, which increases the likelihood that some of these programs will succeed. The company expects a significant number of important study results in the near term, including several potential new medicines that could reach the market. Having multiple late stage programs is important because not all drug candidates succeed, so a broader pipeline improves the chances that enough products will reach the market to drive future growth. This reduces the risk that the company depends too heavily on any single outcome.

Operational efficiency is a reason to invest in Bristol Myers Squibb because the company is actively transforming how it operates to become more focused, cost efficient, and better positioned to support long term growth. In the pharmaceutical industry, where companies must invest heavily in developing new medicines, the ability to run the business efficiently is critical. Bristol Myers Squibb has recognized this and is taking clear steps to simplify its organization, reduce unnecessary costs, and improve how resources are allocated. One of the most important aspects of this transformation is the company’s cost savings program. Management has already delivered meaningful savings and is on track to achieve further reductions over the next few years. These savings are not just coming from cutting expenses, but from fundamentally improving how the company operates. This includes streamlining the organization, reducing duplication across teams, and making better use of technology. By doing this, the company is lowering its overall cost base while still continuing to invest in growth areas. A key difference compared to earlier initiatives is that a larger share of these savings is now expected to directly improve profitability. In the past, cost reductions were often reinvested into the business. While that is still partly the case, the current program is designed so that a meaningful portion of the savings flows through to the bottom line. This means that even if revenue growth is uneven due to factors such as patent expirations, the company can still improve its earnings through better efficiency. Another important element is the increasing use of technology, including artificial intelligence, to improve how the company operates. By using data and automation more effectively, Bristol Myers Squibb aims to move faster in areas such as research, decision making, and commercial execution. This can help reduce costs, shorten development timelines, and improve the overall productivity of the organization. In an industry where speed and execution are critical, these improvements can create a meaningful competitive advantage. Operational efficiency also provides greater financial flexibility. By reducing costs, the company frees up resources that can be reinvested into high priority areas such as new product development, commercial launches, and strategic partnerships. This is particularly important at a time when Bristol Myers Squibb is investing heavily in its pipeline and preparing for a new wave of product launches. The ability to fund these investments while still lowering overall costs is a strong sign of discipline in capital allocation. In addition, a leaner organization can respond more quickly to changes in the market. As the pharmaceutical industry evolves, companies need to adapt to new competition, regulatory changes, and shifts in demand. A more agile structure allows Bristol Myers Squibb to make decisions faster and allocate resources more effectively, which can improve execution across both development and commercialization.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculator for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 3,46, which is from the year 2025. I have selected a projected future EPS growth rate of 8%. Finbox expects EPS to grow by 10,6% in the next five years, but I find it too optimistic. Additionally, I have selected a projected future P/E ratio of 16, which is double the growth rate. This decision is based on Bristol Myers Squibb's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $29,54. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Bristol Myers Squibb at a price of $14,77 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 14.156, and capital expenditures were 1.311. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 918 in our calculations. The tax provision was 2.272. We have 2.036 outstanding shares. Hence, the calculation will be as follows: (14.156 – 918 + 2.272) / 2.036 x 10 = $76,18 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Bristol Myers Squibb's free cash flow per share at $6,31 and a growth rate of 8%, if you want to recoup your investment in 8 years, the Payback Time price is $72,49.

Conclusion

Bristol Myers Squibb is an intriguing company with solid management. It has built its moat through its intellectual property, scientific expertise, and global scale. ROIC has been somewhat volatile, but this is not unusual for the sector, as pharmaceutical companies invest heavily upfront, which temporarily lowers returns, and only later begin to see the full benefit as new and acquired products contribute to earnings. While free cash flow declined slightly in 2025, it remains high with strong margins, which is expected to continue moving forward. Increased pricing pressure is a risk for Bristol Myers Squibb because governments, insurers, and large buyers are increasingly limiting how much the company can charge for its medicines. This reduces pricing flexibility and can lower revenue from key products earlier than expected, even before competition increases. Competition is a risk for Bristol Myers Squibb because it operates in highly competitive markets where new and improved treatments can quickly take market share. Even small advantages in effectiveness, safety, or pricing can shift demand toward competitors, putting pressure on both revenue and growth. Patent losses are a risk for Bristol Myers Squibb because once key drugs lose exclusivity, lower priced alternatives quickly enter the market and can cause a sharp decline in sales. This creates a constant need to successfully launch new medicines to replace lost revenue, which is both time consuming and uncertain. The product portfolio is a reason to invest in Bristol Myers Squibb because it has shifted toward a more diversified mix of newer, fast growing medicines that are already contributing meaningfully to revenue. This reduces reliance on older drugs and creates a stronger and more balanced foundation for long term growth. The pipeline is a reason to invest in Bristol Myers Squibb because it provides a broad and active source of future growth with multiple potential new medicines across different disease areas. Its large number of late stage programs and upcoming data readouts increase the likelihood of successful launches, reducing reliance on any single product. Operational efficiency is a reason to invest in Bristol Myers Squibb because the company is lowering its cost base while improving how it operates, allowing more of its earnings to flow through over time. This also provides flexibility to reinvest in growth areas such as new medicines and product launches while becoming faster and more agile. There are many things to like about Bristol Myers Squibb, but I believe there are better options in the sector. Hence, I will not be investing in Bristol Myers Squibb at this time.

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