This Pharmaceuticals Stock Is A Better Pick Over Bristol Myers Squibb

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we think that Eli Lilly Stock (NYSE: LLY) is currently . is a better pick than Bristol Myers Squibb Stock (NYSE:BMY) in the pharmaceutical sector, despite Eli Lilly being the most expensive of the two. LLY stock trades at approximately 9x trailing revenue compared to 3x for BMY stock. Although both companies saw revenue growth over the past year or so, with a rebound in demand post-pandemic, the diabetes drug Trulicity, along with market share gains for some of Eli Lilly’s drugs, as well as its covid-19 treatment. Helping with its top-of-the-line expansion. For Bristol Myers Squibbo
, its anticoagulant — Eliquis — continues to gain market share and strengthen its overall top-line growth. BMY stock has been weighed down in recent months by growing concerns about loss of sales as its best-selling drug — Revlimid — nears patent expiration in 2022.

For perspective, BMY stock is down 7% over the past six months, outperforming the broader indices, outpacing the 12% gain in the S&P 500 over the same period. This compares with a 32% increase for LLY stock, partially aided by hopes of regulatory approval for its Alzheimer’s treatment — donamonab — which, if approved, would be up for Eli Lilly. Will be a multi-billion dollar opportunity. However, there is much more to compare. Let’s step back to see a full picture of the relative valuations of both companies looking at historical revenue growth as well as operating margin growth. our dashboard Bristol Myers Squibb vs Eli Lilly, industry peers; Which stock is the better bet? There is more detail on this. The excerpts of the analysis are summarized below.

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1. Bristol Myers Squibb’s Revenue Growth Has Been Strong

Now, Eli Lilly’s revenue grew at a faster 20% pace compared to Bristol Myers Squibb’s 15% during the last twelve-month period, primarily driven by market share gains for Trulicity. However, if we look at the last three years, Bristol Myers Squibb’s revenue grew at a CAGR of 27% versus a CAGR of 7% for Eli Lilly. Note that Bristol Myers Squibb’s revenue expansion is attributed to its Celgene . can also be given
Acquisitions in 2019

Looking ahead, Bristol Myers Squibb’s revenue is expected to grow 9% in 2021, but growth will decelerate to low single-digits next year, as Revlimid biosimilar faces competition. However, Bristol Myers Squibb’s other drugs, including Reblozil and Eliquis, should continue to drive top-line growth. Our Bristol Myers Squibb Revenue The dashboard provides more information on the revenue of the company.

Eli Lilly’s revenue is expected to grow 11% in 2021 and in the low single digits next year, with continued market share growth for drugs, such as Trulicity, Vergenio, Olumiant, and Bamlanivima, as well as its COVID-19 treatments. , The company recently announced that it would supply 614,000 doses of its COVID-19 cocktail (a combination of bamalanivimab and atacevimab) to the US government for a total of $1.3 billion, bolstering its top-line growth in the coming quarters. Will do

2. Eli Lilly Sees Better Margin Growth

Looking at profitability, in contrast to the trend seen in revenue growth, Eli Lilly’s operating margin of 21.6% over the past twelve-month period is far better than Bristol Myers Squibb’s -15.6%. If we look at the average operating margin for the past three years, Eli Lilly’s 20.8% figure is much better than Bristol Myers Squibb’s 7.8%. Eli Lilly’s operating margin is 21.6% in the past twelve-month period, up from 21.8% in 2019 before the pandemic. The current operating margin for Bristol Myers Squibb is -15.6% lower than Eli Lilly, and compared to the 22.5% figure in 2019.

It should be noted that Bristol Myers Squibb’s margins have been adversely impacted, as a one-time in-process R&D charge of $11.4 billion was recorded in Q4 2020. This has significantly reduced the reported margin. If we look at the operating margin for the nine-month period ended September 2021, it is 18.1%. Now, we see that between 2016 and 2019 Bristol Myers Squibb’s margin was actually better than Eli Lilly, which was hovering around 22%. But, Eli Lilly has seen a gradual increase from 16% in 2016 to 22% in 2019 and 22% currently. We expect margins of both the companies to face some adverse conditions in the near future, given the inflationary pressures and supply chain constraints.

net of it all

Bristol Myers Squibb’s current valuation appears more attractive than Eli Lilly’s, with BMY stock trading at nearly 3x trailing revenue, versus 9x for ELY stock, and Bristol Myers Squibb has seen even better revenue growth, courtesy of the Celgene acquisition. . However, Eli Lilly has seen better margin expansion, and is more profitable, partly explaining the difference in valuations of the two companies. Even if we look at financial risk, while Bristol Myers Squibb’s 14% cash as a percentage of assets is higher than Eli Lilly’s 8%, Bristol Myers Squibb’s 36% debt figures to 7% as a percentage of its equity. for Eli Lilly, which means Eli Lilly has a better debt position, while Bristol Myers Squibb has a better cash cushion. This means that LLY stock does not appear to be at greater financial risk than BMY stock.

On one hand we have Bristol Myers Squibb, which is facing biosimilar competition for its best-selling drug – Revlimid (accounting for 28% of the company’s total sales) – starting next year, and on the other, We have Eli Lilly, which has a strong trigger in the form of donaemumab. If donnamab is approved, LLY stock could see levels much higher than its current price of $262. That said, investors should take note of the fact that donnaumab has not yet been approved by any regulator. Eli Lilly recently began the process of getting regulatory approval for its Alzheimer’s treatment. While its final phase clinical study data will only be available in 2023, the FDA will consider an accelerated approval application sometime in 2022.

Overall, with better margins for Eli Lilly, and huge potential for donanumab, its peak sales are projected to be $10 billion (if approved), making it a valuation between BMY and LLY. The gap is fair and LLY may continue to outperform BMY stock. going forward.

While LLY stock could see higher levels, 2020 has created several pricing discontinuities that could provide lucrative trading opportunities. For example, you’d be surprised how intuitive it is to approach stock valuations. Abbott vs Vertex,

What if you’re looking for a more balanced portfolio instead? here is one high quality portfolio It has consistently outperformed the market since the end of 2016.

Returns Nov’21 MTD [1] YTD [1] 2017-21 [2]

LLY Return 4% 54% 254%

BMY Return 0%-9% -3%

S&P 500 Returns 1% 22% 105%

Trefis MS Portfolio Returns -3% 46% 297%

[1] Month-to-date and Year-to-date as of 11/29/2021

[2] Cumulative Total Return since 2017

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