Activists Eyes Bristol-Myers

04/20/2017 2:50 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

The news that activist investor Carl Icahn has taken a position in Bristol-Myers Squibb (BMY) is fueling takeover speculation. 

And he's not alone. Jana Partners LLC took a stake in the company last year after Bristol-Myer's lung cancer treatment, Opdivo, fared poorly in a late-stage study. 

In a deal with Jana, the company agreed to add three directors to its board and to launch a $2 billion accelerated share repurchase program.

But perhaps the best reason is that the company might be a bargain. While the shares rose around 15 percent in February on acquisition rumors, more meaningful is that the company has several promising studies in the works testing Opdivo as a treatment for other cancers. 

Plus the company has a robust pipeline of other drugs at various phases of testing. Several of its existing drugs are posting double-digit sales increases.

The company has a hefty cache of about $8.6 billion in cash or cash equivalents, which it could use for more product development or a strategic acquisition. And we like the reliable 2.7 percent dividend.

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