Is Bristol Myers Squibb Stock a Buy?

It's been a challenging past few years for Bristol Myers Squibb (NYSE: BMY). The company's financial results dipped following the loss of patent exclusivity of two important medicines in its arsenal: cancer drugs Revlimid (its former top-selling product) and Abraxane. Bristol Myers has rebounded. Its revenue is moving in the right direction again. However, there will be more patent cliffs for the company in the near future.

Can the drugmaker still deliver strong returns? Let's take a closer look.

Bristol Myers isn't out of the woods

In September, generics for Bristol Myers' cancer medicine Sprycel entered the market. It isn't the company's most important product, not by a mile. However, the two medicines that carry that title -- Eliquis and Opdivo -- will face the same issue later this decade. Eliquis, an anticoagulant, will be out of patent exclusivity by 2029 at the latest, while Opdivo's cliff should come in 2028.

In the third quarter, Eliquis' revenue increased by 11% year over year to $3 billion. Opdivo's sales were $2.4 billion, 4% higher than the year-ago period. Bristol Myers' total revenue of $11.9 billion was 8% more than the prior-year quarter, a strong performance for a pharmaceutical giant. Eliquis and Opdivo combined for roughly 45% of the company's top line in the period. The company could be in trouble unless it can find a way to replace these massive cash cows.

Some good news for the company

Bristol Myers has returned to top-line growth despite generic erosion related to Revlimid and Abraxane thanks to new approvals. Since 2019, the company has launched plenty of brand-new drugs. Bristol Myers is still at it. In September, the U.S. Food and Drug Administration approved the company's Cobenfy, a medicine for schizophrenia. Though this regulatory nod is old news, the market recently sent Bristol Myers' shares soaring because of positive developments related to Cobenfy.

AbbVie, which was working on a potential competitor to Bristol Myers' Cobenfy called emraclidine, reported that the investigational schizophrenia medicine failed to meet its primary endpoints in two phase 2 studies. Emraclidine is almost certainly doomed, which means less competition for Cobenfy and higher revenue than it otherwise would have generated. According to one analyst, Cobenfy could reach peak sales of $10 billion -- and that projection was before emraclidine's phase 2 failure.

So, Cobenfy should become an important growth driver well into the 2030s for Bristol Myers and help it move beyond Eliquis and Opdivo's patent cliffs. Of course, it will have some help. One of the company's more promising new drugs is Reblozyl, a therapy for anemia in treatments for beta-thalassemia that first hit the U.S. market in 2019. In the third quarter, Reblozyl's revenue soared by 80% year over year to $447 million.

Breyanzi, a cancer drug that first earned approval in 2021, is another promising one. Breyanzi's revenue in Q3 increased by 143% year over year to $224 million. Lastly, Bristol Myers will continue pumping out new drugs. The company's pipeline features 51 compounds across many dozen clinical trials.

Don't forget about the dividend

Competition and patent cliffs are nothing new for Bristol Myers. The company has been able to overcome these challenges before. And despite the drugmaker's recent issues, it continues to increase its dividend. Bristol Myers' payouts have grown 33.3% in the past five years. Its forward yield of 4.27% is much higher than the S&P 500's average of 1.32%. Bristol Myers' cash payout ratio is just under 35%. That's conservative and allows the company plenty of space to grow its dividends some more.

Bristol Myers may not be for everyone. However, investors looking for reliable, blue chip dividend stocks should strongly consider investing in this pharmaceutical giant.

Should you invest $1,000 in Bristol Myers Squibb right now?

Before you buy stock in Bristol Myers Squibb, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bristol Myers Squibb wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $900,893!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 18, 2024

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Bristol Myers Squibb. The Motley Fool has a disclosure policy.