Is Bristol-Myers Squibb Still An Undervalued Biopharma Play?

Bristol-Myers Squibb (BMY) is set to report Q2 2025 earnings on July 31, with BofA having slightly trimmed Q2 and full-year 2025 EPS and revenue forecasts, though maintaining a $56 price target. The company faces significant headwinds from U.S. drug pricing policies and looming generic competition, which are expected to lead to several years of earnings decline, despite some long-term revenue optimism for Yervoy. While BMY's valuation remains comparatively low, it is no longer uniquely cheap, making the upcoming earnings call crucial for insights into key product performance and the broader impact of these industry pressures.

Analysis

Bank of America has trimmed its 2025 revenue and EPS forecasts for Bristol-Myers Squibb by over 1%, reflecting near-term headwinds, yet maintains a Neutral rating and a $56 price target based on an 8x P/E multiple on the revised 2025 EPS. This cautious outlook is driven by significant challenges, including an anticipated earnings decline over the next several years due to relentless pressure from generic competition. Furthermore, the company faces substantial regulatory uncertainty from U.S. drug pricing policies, with the IRA's Medicare Part D reform expected to create specific headwinds for key products like Pomalyst, Revlimid, and Camzyos, despite management's view of it being "potentially net neutral" for the overall portfolio. While BMY's valuation at 7-8 times 2025 earnings is low, it is no longer considered unusually cheap relative to peers like Pfizer and Merck, suggesting the market has already priced in these risks. The upcoming July 31 earnings call will be critical for investors to gauge the commercial performance of key growth products such as Reblozyl and Breyanzi, which must offset these pressures for the company to navigate what is described as "several tough years" ahead.

Key Decisions for Investors

• Investors should scrutinize the upcoming July 31 earnings call for specific management commentary on the expected magnitude of earnings decline from generic competition and the financial impact of U.S. drug pricing policies on key products.
• Given that BMY's valuation is now in line with peers, the thesis of it being an 'unusually cheap' stock is diminished, warranting a re-evaluation of the risk-reward profile against its anticipated medium-term growth hurdles.
• It is prudent to weigh the company's modest long-term revenue growth outlook for the late 2020s, driven by Yervoy, against the more immediate and certain pressures from patent cliffs and regulatory headwinds before initiating or adding to a position.