We're buying 300 shares of Bristol-Myers Squibb at roughly $58 each. Following Wednesday's trade, Jim Cramer's Charitable Trust will own 800 shares of BMY, increasing its weighting to about 1.25% from 1%. Shares of pharmaceutical maker Bristol-Myers have dropped about 3% in the past two days in the absence of any real news. The stock hit a 52-week high Monday. We're using the dip to scale deeper into this recently initiated position.
Bristol-Myers is in the midst of a transition under the leadership of CEO Chris Boerner. He's navigating one of the biggest patent cliffs in the pharma industry, with key products like blood-clot prevention drug Eliquis and lung-cancer therapy Opdivo coming off patent and facing generic competition in the next few years. Losing patent protection will cause the company's total sales to decline through 2029.
The market already has a good understanding of this dynamic. It's why Bristol-Myers shares currently trade at about 8 times the 2025 consensus earnings per share estimate.
"What the market currently underappreciates is the sales potential of Cobenfy," said analysts.
This drug was acquired last December when Bristol-Myers bought Karuna Therapeutics for $14 billion. This deal was one of many multi-billion acquisitions Bristol Myers made to replenish its pipeline.
In September, the FDA approved Cobenfy to treat schizophrenia in adults. It's the first novel medication for the disorder in over 30 years. Schizophrenia is a more than $20 billion market in the U.S., according to JPMorgan analysts.
"We think Bristol-Myers will dominate in this space after AbbVie's competing drug recently failed in two mid-stage trials," noted experts.
JPMorgan currently estimates annual Cobenfy sales of $5 billion by 2030, but analysts said they wouldn't be surprised to see peak sales in the $10 billion-plus range if the drug receives approval for additional indications.
Adding a product potentially that large to the fold is a big deal when considering Bristol-Myers is expected to generate about $47 billion in sales this year. Bristol-Myers' price-to-earnings multiple should re-rate higher as Cobenfy sales ramp up in the years ahead -- easing investors' concerns about the company's growth post-patent cliff.
"Lastly, we like how Bristol-Myers pays a hefty dividend as we wait," mentioned financial advisors.
The stock currently sports an annual dividend yield of about 4.15%.