UBS On Bristol-Myers Squibb: 'We Like This Opportunity Right Here Right Now'

• Bristol-Myers Squibb Co BMY shares are down 13 percent in the last three months, despite touching a 52-week high of $70.54 on July 14.
• UBS analyst Marc Goodman upgraded the rating on the company from Neutral to Buy, while raising the price target from $65 to $75.
• Bristol-Myers Squibb’s current stock valuation does not reflect Opdivo’s peak sales potential and the stock is likely to rise on increased visibility into operating leverage, Goodman said.

Analyst Marc Goodman mentioned that stronger-than-expected renal cancer data at ESMO, a large lung market, and additional smaller new indications indicate Opdivo’s improved sales. Bristol-Myers Squibb’s management has also indicated that it expects so witness significant operating leverage post 2017.

The company’s current stock valuation does not reflect the peak sales potential for Opdivo. As the company provides more visibility into its potential operating leverage, the stock is expected to appreciate, Goodman added.

Bristol-Myers Squibb’s Opdivo sales forecast for 2020 has been raised from $8 billion to ~$10 billion and its operating margins forecast for the year has been raised from 30-35 percent to 35-40 percent. The EPS estimate for 2020 has been raised from $4.16 to $5.34.

Goodman believes Opdivo provides Bristol-Myers Squibb with a clear leadership in the emerging I/O space. Although the company has a large portfolio of other candidates in this space, clinical data for them is expected in the next 12-24 months.

Terming the recent underperformance of the pharma sector as “overdone,” Goodman wrote, “[W]e expect a bounce back not only in the short term but also our US strategist expects the sector to maintain its leadership over the next few years.”