Bristol Myers margins to take hit on investment to replenish drug pipeline: SocGen

Investing.com -- Bristol-Myers Squibb Company (NYSE:BMY) faces an uphill challenge to grow revenue as its expiring drug patents will force the pharma giant to spend big to replenish its drug pipeline, pressuring margins and earnings growth, analysts at Societe General said in a note Monday.

Societe General downgraded its rating on Bristol Myers to hold from buy, and cut its price target on the stock to $51 from $85, citing margin worries. 

"We are cutting our adjusted (Non GAAP) EPS forecasts (2024-32) by 12% to 33% because we now expect slower top-line growth to cause greater margin pressure," the analysts said. 

The analysts forecast for adjusted EPS estimates are up to 39% below consensus on worries that top Bristol Myers' top-line growth is set slow as management "will have to invest more to replenish the pipeline in order to mitigate the impact of patent expiries."

As drug patents expires, generic or biosimilar manufacturers can produce lower-cost alternatives and cut prices, leading to a slump in sales for the brand name drug.   

"We believe that investors need to be extremely patient to enjoy the fruits of any potential re-rating," the analysts said.

Bristol-Myers Squibb is down 17.6% over the past year.