BMY's 2025 Results Confirm Growth Transition But Highlight Steep Execution Hurdles

What happened

Bristol Myers Squibb reported its Q4 and full-year 2025 financial results, likely showing a continued revenue mix shift with Growth Portfolio products like Breyanzi and Reblozyl expanding while Legacy drugs such as Eliquis and Revlimid face ongoing erosion. Despite management's optimistic framing, the persistent decline in Legacy revenue underscores the severe patent cliff risks, with approximately 64% of 2025 revenue at LOE risk by 2030. Deleveraging progress may have been modest, but the net debt/EBITDA ratio remains elevated at around 12.9x, straining the balance sheet amid high interest costs. Strong free cash flow generation, evident from prior quarters, probably supported dividend payments and debt reduction, yet this is threatened by IRA negotiations on Eliquis and global pricing pressures. The stock's persistent discount to DCF value reflects investor skepticism that new launches and cost savings can fully offset looming revenue losses and integration challenges.

Implication

The results reinforce that BMY's renewal thesis hinges on flawless execution: Growth Portfolio revenue must accelerate beyond mid-teens to counter accelerating Legacy declines, while any slippage could trigger sustained top-line contraction. Elevated leverage at 12.9x net debt/EBITDA constrains strategic flexibility, making the $10B debt-reduction goal by 2026 a critical near-term catalyst for reducing balance sheet risk. Robust free cash flow provides a temporary buffer, but it remains vulnerable to IRA-driven price cuts on key drugs like Eliquis and potential integration missteps from recent M&A. Pipeline milestones in oncology, cell therapy, and CNS must deliver positive clinical and commercial outcomes to validate the long-term growth story amid intense competition. Until these factors converge more convincingly, the stock's deep discount reflects justified caution, warranting a 'show-me' approach rather than a conviction buy.

Thesis delta

The full-year 2025 results do not materially shift the investment thesis from the DeepValue report's 'POTENTIAL BUY' rating, as they confirm the ongoing growth transition but also highlight unresolved risks from LOEs, leverage, and pricing pressures. Any upgrade to a more positive stance still requires clearer evidence that Growth Portfolio expansion can outpace Legacy erosion while deleveraging advances steadily without compromising R&D or launch execution.