As published in the 12/31/23 Ariel Investment Trust Quarterly Report
Founded in 1858, Bristol-Myers Squibb Company (NYSE: BMY) is a global biopharmaceutical company with a rich history of transformative contributions to the healthcare industry. Headquartered in New York City, the company is a leader in oncology and immunology, evolving into a powerhouse at the forefront of discovering, developing and delivering innovative medicines.
Just What the Doctor Ordered
Bristol-Myers Squibb owes its success to a strategically diversified yet synergistic portfolio of businesses. The company operates across various therapeutic areas, including oncology, immunology, cardiovascular, and fibrosis. Its comprehensive approach—spanning drug discovery, clinical development, manufacturing, and commercialization—has been key to its success. This model not only offers a constant revenue stream but can also hedge against market uncertainties and competitive pressures. The cornerstone of Bristol-Myers Squibb’s diversified portfolio is its emphasis on research and development. The company consistently invests in cutting- edge science and focuses on novel therapies and precision medicine. This commitment has translated into groundbreaking treatments, such as the blockbuster drug Opdivo, which is revolutionizing cancer immunotherapy and establishing Bristol-Myers Squibb as a pioneer in the field.
The Clot Stops Here
Bristol-Myers Squibb introduces compelling investment prospects within its pipeline. Specifically, its primary focus is a collaboration with Johnson & Johnson—Milvexian—which offers an advanced treatment for blood clotting. The drug is currently undergoing the final testing stages in Phase 3 trials for secondary stroke prevention (SSP), atrial fibrillation (AFib) and acute coronary syndrome (ACS). These markets collectively represent a combined value of at least $5 billion. Despite differing opinions on the drug’s effectiveness in Phase 2 (earlier testing), we remain optimistic. The observed benefits, such as a lower risk of bleeding, create an opportunity for a positive re-evaluation in 2025, especially with the anticipated release of Phase 3 clinical data.
A Prescription for Strong Cash Flows for Future Growth
Bristol-Myers Squibb capitalizes on its robust cash flow to support initiatives that align with shareholder interests. The company also leverages mergers and acquisitions (M&A) to ensure sustainable growth. The impending purchase of Mirati Therapeutics is projected to strengthen and diversify its oncology portfolio, which underscores the company’s dedication to expanding growth. The recently announced Karuna Therapeutics deal further complements this expansion effort. Concurrently, the company authorized a $3 billion share buyback and $5 billion in Accelerated Share Repurchases (ASRs). Its dividend yield of 4.6% further underscores its commitment to shareholder value creation.
As of December 31, 2023, Bristol-Myers Squibb traded at a price-to-earnings (P/E) ratio of 6.85x, which is at the lower end of the global pharmaceutical sector. The ratio has been weakened by several new product launches that have been growing below consensus expectations. However, we are optimistic about several new drugs, such as Sotyktu®, Camzyos®, Breyanzi®, and Opdualag®, due to their innovative nature and anticipated efficacy. With this maturing pipeline, we continue to see upside.
The companies highlighted in the Company Spotlights were held in one or more of the following Fund portfolios during the quarter ending December 31, 2023: Ariel Fund, Ariel Appreciation Fund, Ariel Focus Fund, Ariel International Fund and Ariel Global Fund. We candidly discuss various individual companies to illustrate our investment process. The information and our opinions were current as of the date above but are subject to change. The information shown does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. These securities do not represent all securities purchased or sold to investors during the period. The performance of any single portfolio holding is no indication of the performance of other portfolio holdings of any Fund or of any particular Fund itself. Portfolio holdings are subject to change. Past performance does not guarantee future results. Click here for the top holdings of the Funds.
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