JPM: Deal-making still a 'top priority' at Bristol Myers as CEO eyes midsize buys

Bristol Myers Squibb CEO Giovanni Caforio debuts new brand
Bristol Myers Squibb continues to look for "midsize bolt-on deals" similar to its $13.1 billion purchase of MyoKardia, CEO Giovanni Caforio, M.D., said at the annual J.P. Morgan healthcare conference. (Robert Bruschini/Bristol Myers Squibb)

Even after shelling out $74 billion for Celgene and $13.1 billion for MyoKardia, Bristol Myers Squibb is not done with deal-making.

The New York pharma still has “significant financial flexibility” to pull off deals, Bristol Myers CEO Giovanni Caforio, M.D., said at the annual J.P. Morgan healthcare conference Monday, calling business development a “top priority” at the company.

Specifically, “We will continue to look for midsize bolt-on deals that further strengthen our object to grow the company into the second half of the decade,” he said. As of the third quarter, Bristol Myers had about $22 billion in cash, and it expects to have $45 billion to $50 billion in free cash flow around 2021 to 2023.

The acquisition of Celgene, though costly, also gave Bristol Myers such big cash generators as Revlimid, which chalked up 10% year-over-year growth in the third quarter to $3.03 billion in sales. The company just dialed up its cost-cutting goal as result of the buyout to $3 billion from the previous $2.5 billion.

Another important drug for Bristol Myers is Opdivo. The PD-1 inhibitor’s rollout in first-line non-small cell lung cancer is going well, while the disease’s second-line setting is “sort of behind us” in terms of new patient starts, Caforio said. He also pointed to bladder cancer, first-line kidney cancer and the broad post-surgery adjuvant setting as further opportunity for longer-term Opdivo growth.

RELATED: Bristol Myers strikes $13B MyoKardia buyout to gain heart drug

The company is now focused on reducing debt to further strengthen its ability to invest in striking deals and increasing shareholder return, Caforio said. “We also plan to strengthen our balance sheet to support capacity for additional business development by accelerating repayment $4 billion of debt into this year,” he said.

To pay down debt, it also needs new drugs to churn out revenue.

Caforio pointed to a non-risk-adjusted revenue potential of more than $20 billion in its launch portfolio. These could come from anemia drug Reblozyl, MyoKardia’s heart drug mavacamten, TYK2 inhibitor deucravacitinib for psoriasis and other autoimmune diseases as well as its cell therapies inherited from Celgene, all of which could hit at least $4 billion in peak sales by Caforio’s estimate.

RELATED: Bristol Myers CVR down the drain as CAR-T drug's FDA manufacturing inspection spots problem

The last piece of the growth picture recently suffered a setback, though. The FDA didn’t hand out a decision on CD19-targeted CAR-T candidate liso-cel by the end of 2020, despite repeated previous delays in its go-to-market timeline.  

“I am confident in the approval of liso-cel, and I’m very confident in the profile of liso-cel as a differentiated CAR-T,” he said.

The FDA's non-decision nixed a $9-apiece Celgene deal sweetener called a contingent value right, too. That takes Bristol Myers off the hook for about $6.4 billion in additional payments to holders of that CVR, initially issued to Celgene shareholders as part of that buyout. So the company has redirected some of that money into an additional $2 billion in share buyback.