Credit Suisse Downgrades Bristol-Myers Squibb Co. (BMY) to Neutral
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Credit Suisse downgraded Bristol-Myers Squibb Co. (NYSE: BMY) from Outperform to Neutral with a price target of $63.00 following news Friday that its CheckMate-026 (CM-026) Study for Opdivo in 1st line non-small cell lung cancer (NSCLC) missed its primary endpoint.
Analyst Vamil Divan commented, "While we are not fans of reacting to news Friday's developments are too significant and surprising for us to maintain our bullish stance on BMY. We remain bullish on the I-O market overall and still have robust I-O franchise estimates for BMY, with ~$8.5Bn in 2020 and >$10Bn in 2023, driving operating margins up from 23% in 2015 to 36% in 2023. Given how leveraged BMY is to I-O, however, even these rather bullish estimates still give us a DCF valuation of $61, making it very difficult for us to continue recommending the stock at this time. Our new blended target price is $63, which is a 75%/25% blend of DCF and relative valuation, with our relative based on 24.0x our new 2017 EPS of $2.90. Conversations with investors lead us to wonder if BMY may be a more attractive takeout target now, but we think potential buyers would want to wait and see how BMY's position in I-O gets sorted out before considering stepping in."
Shares of Bristol-Myers Squibb Co. closed at $63.28 yesterday.
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