Buy Bristol-Myers Squibb

Malcolm Berko
Tue, 19 Feb 2019 21:00:00 -0800
Lifestyle

Dear Mr. Berko: I'm interested in buying stock in Bristol-Myers Squibb because I'm told the company has a weight loss drug that will soon be on the American market. I know there are many weight loss drugs that promise the moon, but this one is supposedly a revolutionary drug with no side effects. It apparently eliminates cravings and is being prescribed by European doctors. Based on this, I'd like to buy 600 shares. — TK, Akron, Ohio

Dear TK: Bristol-Myers Squibb (BMY-$51) has a panoply of drugs with meaningless names, from Atripla to Zerit, but I didn't think that one is a revolutionary weight loss pill, so I called BMY in Princeton, New Jersey, and asked an "almost VP" whether BMY has such a drug in its formidable pipeline. He said, "Someone's yanking your chain." That'll disappoint our nation's corpulent cops, most of whom have bellies that flop over their belts. A weight loss drug that eliminates a person's food cravings with no side effects would be blockbuster and a panacea for an overly obese America. And the share price of that lucky pharmaceutical company would jump over the moon.
Updated: Wed Feb 20, 2019

Dear Mr. Berko: I'm interested in buying stock in Bristol-Myers Squibb because I'm told the company has a weight loss drug that will soon be on the American market. I know there are many weight loss drugs that promise the moon, but this one is supposedly a revolutionary drug with no side effects. It apparently eliminates cravings and is being prescribed by European doctors. Based on this, I'd like to buy 600 shares. — TK, Akron, Ohio

Dear TK: Bristol-Myers Squibb (BMY-$51) has a panoply of drugs with meaningless names, from Atripla to Zerit, but I didn't think that one is a revolutionary weight loss pill, so I called BMY in Princeton, New Jersey, and asked an "almost VP" whether BMY has such a drug in its formidable pipeline. He said, "Someone's yanking your chain." That'll disappoint our nation's corpulent cops, most of whom have bellies that flop over their belts. A weight loss drug that eliminates a person's food cravings with no side effects would be blockbuster and a panacea for an overly obese America. And the share price of that lucky pharmaceutical company would jump over the moon.

BMY had $22.3 billion in revenues last year, with foreign sales accounting for nearly 65 percent of that. Though the stock is down from its 2016 high of $77 — because of an earnings blip — recent research reports from Standard & Poor's, Argus Research, Thomson Reuters, Value Line, UBS and Bank of America consider BMY attractive at $51. BMY markets ethical pharmaceuticals, diagnostics, infant formula, orthopedic implants and health and beauty aids. Since Bristol-Myers merged with Squibb in 1989, it has been one of the largest, most well-known pharmaceuticals on either side of the prime meridian. BMY is a fine, classy long-term investment for conservative shareholders. It pays a decent and growing 3.4 percent dividend, has a beta that's less than 1.0, has an A++ financial rating by Morningstar, has hugely improving net profit margins (probably over 27 percent this year), has superb research and development, and has modest revenue growth.

BMY began 2019 with a bang. In January, it bought Celgene, paying a 40 percent premium over market value. Many on Wall Street believe that BMY scored an impressive coup with this $74 billion purchase, thinking Celgene is worth over $125 billion. Celgene is a global biopharmaceutical company engaged in the commercialization of therapies to treat blood cancer and immune-mediated inflammatory diseases using gene and protein regulation. I expect the purchase of Celgene to add impressive benefits to BMY's exciting $10 billion oncology business. The company has enjoyed enormous success, with impressive growth in revenues plus fine earnings and healthy cash flow.

Celgene's stock split 2-for-1 in 2014 and traded at $140 in 2016. CELG's price took it on the chin in late 2017 over the late-stage failure of its Crohn's disease drug and its botched filing for the approval of Ozanimod in treating multiple sclerosis. Still, Celgene has a number of impressive therapies on the market, plus a fantastic pipeline with four high-value near-term hematology programs, which should become part of a powerful drug arsenal in the next three years. Observers believe that Celgene's cell therapy programs may be the best in the industry and that Celgene has the most effective approach in B cell antigen therapies for the treatment of multiple myeloma. Celgene has six new drugs on the market that are expected to put an additional $15 billion on the books in the coming two years.

The $74 billion price tag says that BMY paid 10 times earnings for Celgene, and that's a swell deal no matter how you slice the genes. Only five other biotechs have forward earnings multiples below 10. So buy 600 shares of BMY and schmile.