BMY's Growth Portfolio Offsets Declines but 2026 Policy Risks Loom Large

What happened

Bristol Myers Squibb's 2025 results show a shifting revenue mix, with Growth Portfolio revenues up 17% partially offsetting a 15% decline in Legacy drugs, creating a surface-level stability narrative. However, this transition is underpinned by significant policy-driven fragilities, including Inflation Reduction Act price resets for Eliquis and a Medicaid free-supply agreement effective January 1, 2026, which threaten net pricing. Additionally, Revlimid erosion is set to accelerate after January 31, 2026, when U.S. generic licenses become non-volume-limited, posing a direct cash flow risk. Management's 2026 guidance assumes Eliquis achieves 10-15% growth while maintaining gross margins of 69-70%, but filings reveal net price pressures are already evident from Medicare Part D redesign. Investors should critically assess whether the growth portfolio's momentum can sustainably counter these headwinds without margin degradation in the coming quarters.

Implication

The immediate implication is that BMY's current stock price reflects a fragile portfolio transition story that hinges on Eliquis executing a 10-15% growth target amidst regulatory headwinds. Key risks include Eliquis failing to meet this target due to IRA price resets or conceding margin through higher concessions, which would signal deeper profitability issues. If gross margin dips below the guided 69-70% range in upcoming quarters, it could trigger a re-rating towards the bear case of $52, eroding investor confidence. Conversely, confirmation of stable margins and Eliquis performance might support a move to the base case $65, but upside is limited without successful pipeline readouts in late 2026. Therefore, a prudent strategy is to monitor observable proof points in quarterly reports for sustainable execution before increasing exposure, aligning with the 'WAIT' rating.

Thesis delta

The Zacks article reiterates BMY's growth portfolio offsetting legacy declines, which is consistent with the DeepValue report's base scenario but adds no new information. No shift in the investment thesis is warranted; the call remains to wait for Q2 2026 confirmation of Eliquis growth and gross margin stability, as policy fragilities and Revlimid erosion risks are already priced into the 'WAIT' stance.