Bristol-Myers Bets on Curing Cancer

02/29/2016 7:00 am EST


Glenn Rogers

Contributing Editor, Internet Wealth Builder and The Income Investor

Currently, chemotherapy and radiation are two of the few tools that doctors have to fight cancer and both are fairly primitive, asserts Glenn Rogers in Internet Wealth Builder.

In the not-too-distant future, we will likely look back on this era of cancer treatment as the equivalent of applying leeches, as they did in the early days of medicine in the absence of any known cures.

It's my guess that our children will not have to endure these types of treatments and I'm interested in companies that are playing a leading edge role in developing new and exciting cures.

Increasingly, there is hope for more advanced treatments in the relatively new field of immuno-oncology, which essentially uses healthy cells to attack and destroy cancer cells.

One company that has emerged as a leader in this field is Bristol-Myers Squibb (BMY), which has developed a number of promising new drugs over the last several years.

One that shows tremendous potential is Opdivo. It has successfully completed a number of clinical trials, many which were stopped early because the drug produced such a strong survival advantage.

Opdivo is being successfully used to treat melanoma, lung cancer, kidney cancer, and advanced renal cell carcinoma. It is just one of the BMY drugs that has a positive effect on previously difficult to treat cancers.

Essentially, the drug works by strengthening the immune system and helps use the patient's own body to attack and destroy the cancer cells.

Bristol-Myers has delivered 12 new medicines to patients over the last seven years. I should mention BMY is also very active in various therapies for hepatitis and HIV.

The company had revenues of over $16 billion in 2015 and has paid dividends to shareholders for more than 300 consecutive quarters. Currently, the stock pays a quarterly dividend yielding 2.38%.

The company recently announced strong 4th quarter results and gave positive guidance for 2016 with earnings per share targeted at $2.35, which is above estimates. Gross margins are over 75%.

Bristol-Myers Squibb currently has an 80% share of the immuno-oncology marketplace, which is forecasted to reach $40 billion in the next five years.

The company believes that Opdivo alone could reach sales of over $8 billion by 2020. Certainly, other players will come along, but Bristol-Myers has a nice lead in this critically important field.

With a strong pipeline and robust revenues, the recent sell-off in the shares makes the stock a buy. We recommend purchase with a target of $70.

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