Dear Mr. Berko: I’m interested in buying stock in Bristol-Myers Squibb because I’m told the company has a weight loss drug that will soon be on the American market. I know there are many weight loss drugs that promise the moon, but this one is supposedly a revolutionary drug with no side effects. It apparently eliminates cravings and is being prescribed by European doctors. Based on this, I’d like to buy 600 shares.
— TK, Akron, Ohio
Dear TK: Bristol-Myers Squibb (BMY-$51) has a panoply of drugs with meaningless names, from Atripla to Zerit, but I didn’t think that one is a revolutionary weight loss pill, so I called BMY in Princeton, N.J., and asked an “almost VP” whether BMY has such a drug in its formidable pipeline. He said, “Someone’s yanking your chain.” That’ll disappoint our nation’s corpulent cops, most of whom have bellies that flop over their belts. A weight loss drug that eliminates a person’s food cravings with no side effects would be blockbuster and a panacea for an overly obese America. And the share price of that lucky pharmaceutical company would jump over the moon.
BMY had $22.3 billion in revenues last year, with foreign sales accounting for nearly 65 percent of that. Though the stock is down from its 2016 high of $77 — because of an earnings blip — recent research reports from Standard & Poor’s, Argus Research, Thomson Reuters, Value Line, UBS and Bank of America consider BMY attractive at $51. BMY markets ethical pharmaceuticals, diagnostics, infant formula, orthopedic implants and health and beauty aids. Since Bristol-Myers merged with Squibb in 1989, it has been one of the largest, most well-known pharmaceuticals on either side of the prime meridian. BMY is a fine, classy long-term investment for conservative shareholders. It pays a decent and growing 3.4 percent dividend, has a beta that’s less than 1.0, has an A++ financial rating by Morningstar, has hugely improving net profit margins (probably over 27 percent this year), has superb research and development, and has modest revenue growth.
BMY began 2019 with a bang. In January, it bought Celgene, paying a 40 percent premium over market value. Many on Wall Street believe that BMY scored an impressive coup with this $74 billion purchase, thinking Celgene is worth over $125 billion. Celgene is a global biopharmaceutical company engaged in the commercialization of therapies to treat blood cancer and immune-mediated inflammatory diseases using gene and protein regulation. I expect the purchase of Celgene to add impressive benefits to BMY’s exciting $10 billion oncology business. The company has enjoyed enormous success, with impressive growth in revenues plus fine earnings and healthy cash flow.
