Bristol-Myers Squibb: Bad News Buy?

10/25/2016 8:00 am EST


Todd Shaver

Founder and Editor-in-Chief,

Following failed trial data regarding its lung cancer drug Opdivo, this high quality drug stock has dropped to its lowest level in almost two years, observes Todd Shaver, editor of

This was a worst-case scenario for Bristol-Myers Squibb (BMY) and a major win for competitor Merck (MRK). The two firms had been battling over who will win an emerging opportunity in lung cancer treatment.

Investors now expect Merck to completely own the segment of lung cancer patients, leaving Bristol with no part of the lung cancer opportunity whatsoever. Very disappointing.

While this was a smaller part of the earnings built into expectations for Bristol, the contribution accounted for most of the assumed growth. Ouch.

This was a painful turn of events for us. We too were expecting Bristol to recover in the lung cancer opportunity.

However, we believe the market is overly punishing Bristol for the hiccup, in turn creating a buying opportunity. This is a blue chip name in healthcare with a diverse lineup of drugs.

We see absolutely no risk to the dividend due to this event, which is running at $1.52 annually or comfortably below EPS of nearly $3.00. The current dividend yield is a very attractive 3%.

We think this is an excellent opportunity to buy more of this blue chip name, for a patient investor who can wait for the breadth and depth of this best-in-class franchise to work its way out of the near term hole.

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By Todd Shaver, Editor of

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