Bristol-Myers a Top Pick

Tags: bmy, lly, pfe, nvs, wye
20 Dec 2:52am
Posted by ZacksResearch
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Bristol-Myers Squibb, Inc. (BMY) remains one of our top-picks in the pharmaceutical industry for 2009. We like Bristol for a number of reasons, including the company's solid financial position, a deep pipeline with significant biologic exposure, and turnaround/acquisition potential.

Bristol also offers a big dividend of $1.24 per share (recently confirmed Thursday), which yields 5.5%. The company has the lowest exposure to foreign exchange translation among its U.S. peers, and is expected to grow the bottom-line by approximately 11% CAGR [compound annual growth rate] through 2012.

Oh, by the way, Bristol is sitting on over $8 billion in cash, and just announced today they will be spinning off the Mead Johnson Nutritional business to shareholders in 2009. The Mead Johnson IPO is expected to fetch another $1 billion in cash for Bristol.  By the end of the first quarter 2009, Bristol could be sitting on nearly $10 billion in cash.

On the growth side, Bristol is among few that can boast of an estimated double-digit five-year EPS CAGR. Long-term growth is sustainable with a product suite heavy in high-growth areas such as biologics, cancer and cardiovascular drugs. The late-stage pipeline includes two very promising candidates (apixaban and saxagliptin), both of which will compete with mega-blockbusters if approved.

Bristol has been very active in addressing the impending U.S. patent expiration of Plavix in 2011 by selling off less profitable businesses and reinvesting in higher growth areas. We expect management to put its cash to work in 2009 to expand its already very significant late-stage biologic pipeline. The company is actively looking for strategic acquisitions in the oncology field.

Bristol took a stab at ImClone earlier this year but walked away when the price didn't make sense. Still, management netted $1B in proceeds from ImClone stock when Eli Lilly (LLY) closed the deal November. But what makes Bristol an attractive investment from a shareholder perspective also makes the company an attractive takeover target from an competitor perspective.

We expect consolidation in the industry in 2009. Potential suitors include Pfizer (PFE), Glaxo (GSK), Sanofi (SNY), Wyeth (WYE) or Novartis (NVS).

And Bristol's valuation is very attractive. The company trades at just 11.5x estimated 2009 EPS of $1.97.

Read the full analyst report on BMY.

Read the full analyst report on LLY.

Read the full analyst report on PFE.

Read the full analyst report on GSK.

Read the full analyst report on WYE.

Read the full analyst report on NVS.




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