Patent Cliff Looms Large for Bristol-Myers Squibb Stock (BMY)

Yahoo

22-04-2025

Bristol-Myers Squibb (BMY) stock is down 11% year-to-date as the company navigates several looming patent cliffs. After a $13 billion acquisition of MyoKardia for its obstructive hypertrophic myopathy (HCM) drug, Camzyos, in 2020, the pharmaceutical giant has had difficulty achieving a return on investment.
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Bristol once believed Camzyos, FDA-approved for obstructive HCM (oHCM), could generate $4 billion in peak annual sales, but this has taken a hit on many fronts. Last week, Bristol revealed that Camyzos failed a critical Phase 3 trial assessing the drug in patients with non-obstructive HCM (nHCM), negating one-third of the HCM market. The company's struggles to 'fill the shoes' of blockbusters like Eliquis and Revlimid concern its future prospects, meriting a bearish outlook on its stock.
After a slower-than-expected launch, Camzyos generated $223 million in revenue in the fourth quarter of 2024. Although the drug is the first of its kind for this genetic heart disease, it also competes with traditional treatments such as beta blockers.
Moreover, many HCM patients go undiagnosed, further limiting the total addressable market. After a failure in nHCM, the company may have to temper its expectations of Camzyos. Moreover, Bristol may soon face competition from Cytokinetics (CYTK), whose me-too cardiac myosin inhibitor, aficamten, awaits a September FDA approval decision in oHCM.
Aficamten could split the market for oHCM, especially should the drug generate a different outcome in nHCM. While the nHCM failure definitely limits Camzyos' market, the drug is still anticipated to generate upwards of $2 billion in peak annual revenue.
Prospects like Camzyos are crucial because BMY wants to see a return on investment after dishing out $13 billion and because BMY has several blockbuster drugs nearing a 'patent cliff.' To review, after drugs are approved, their intellectual property is protected for a limited time before others can sell generic versions. After this exclusivity period, generics can flood the market, effectively decreasing the branded drug's pricing power and market share. This is also why large pharmaceutical companies invest so much in research and development and are willing to spend billions on promising drugs.
Unfortunately for Bristol, its top two drugs, Eliquis and Opdivo, are expected to succumb to generic competition within the next three years. Together, they make up approximately 45% of Bristol's total revenues. Its third-largest drug, Revlimid, lost exclusivity in 2022. In Q4 2024, Revlimid revenues dropped 8% worldwide to reach $1.4 billion, with further expected declines en route.
On the positive front, BMY has a few promising growth prospects brewing. For instance, Cobenfy is a highly anticipated schizophrenia drug that recently received FDA approval. The drug represents the first novel treatment for the condition in over seven decades. Analysts believe Cobenfy could generate anywhere between $2 billion and $10 billion at its peak.
However, the drug wasn't cheap. BMY spent $14 billion to acquire its developer, Karuna Therapeutics. While a strategy of simply acquiring promising drugs can pay off, it's not as cost-effective as developing them in-house. Drugs like Cobenfy and Camzyos could have been developed for much less than $1 billion had Bristol developed them itself.
Of course, Bristol does have its own growth engine. It hopes that its subcutaneous version of Opdivo, branded as Opdivo Qvantig, can help extend the impact of its immuno-oncology franchise. Interestingly, the company is engaging in strategic cost-cutting and reinvestment.
It aims to cut $2 billion in costs by the end of 2027. Notably, this timeline perfectly aligns with Opdivo's loss of exclusivity in 2028. Lastly, the company is looking for additional 'bolt-on opportunities' via acquisitions and continues to advance several pipeline assets through clinical trials.
On Wall Street, BMY has a Hold consensus rating based on four Buy, 12 Hold, and one Sell rating over the past three months. BMY's average price target of $57.77 implies a 17% upside potential over the next twelve months.
Last week, Tim Anderson of Bank of America Securities reiterated a Hold rating on BMY with a price target lowered from $63 to $58. The analyst expressed concerns about Camzyos' clinical setback. He also noted 'broader pharmaceutical sector' problems, like tariffs and drug pricing regulations, that lower overall price-to-earnings (P/E) multiples. Lastly, he believes Bristol will 'face several years of earnings pressure due to generic competition.'
The recent Camzyos nHCM trial failure highlights the challenges in developing new blockbusters to offset impending revenue losses. However, this is just one problem. The more pressing concern remains the looming patent expirations for Eliquis and Opdivo, which make up nearly half the company's revenue base.
BMY's strategy of large-scale acquisitions has been a mixed bag and comes at a price. While newly approved drugs like Cobenfy offer promising growth prospects, building a portfolio to replace the revenue from established blockbusters is an uphill battle for any pharmaceutical company. And as some on Wall Street have pointed out, BMY's valuation is no longer relatively cheap. As evidenced by its consensus Hold recommendation, investors may benefit from siding cautiously as the company continues its search for the next generation of blockbuster medicines.
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