BMY’s Heart Drug Fails: What This Means for Your Portfolio

Camzyos Trial Setback – What Happened?

Bristol Myers Squibb (NYSE: BMY) has been dealt a blow with its heart drug Camzyos (mavacamten). In April 2025, a 580-patient Phase 3 trial (ODYSSEY-HCM) in patients with non-obstructive hypertrophic cardiomyopathy failed to meet its main goals (^[1]). After 48 weeks of treatment, Camzyos did not significantly improve patients’ symptoms, functional capacity, or exercise ability compared to placebo (^[1]). No new safety problems emerged, but the disappointing results highlight how tough it can be to demonstrate benefits in less severe forms of this heart condition (^[1]). Camzyos is already approved (and performing well) for the obstructive form of HCM, so the trial failure mainly closes off an expansion opportunity rather than affecting current revenue. Investors took note – BMY’s shares dipped ~1.6% in after-hours trading following the announcement (^[1]). This news raises fresh questions about BMY’s growth prospects and puts a spotlight on the company’s fundamentals, from its dividend to its drug pipeline.

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Income investors have long been drawn to BMY’s dividend. The company has paid dividends for 93 years and has increased its payout for 16 consecutive years (^[2]). The latest hike came in December 2024, when BMY’s board raised the quarterly dividend by ~3% to $0.62 per share (^[2]). At the recent stock price, that puts BMY’s dividend yield in the ballpark of 5% – a notably high yield for a large pharmaceutical company (^[3]). This generous payout is supported by a solid history of earnings and cash flow generation.

– Yield vs. Peers: BMY’s ~5% dividend yield stands well above the S&P 500 average and even higher than many pharma peers, reflecting both the company’s commitment to returning cash and a depressed share price that has lifted the yield. (^[3]) (^[4])

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– Consistency: With 16 years of consecutive increases, BMY has proven willing to steadily grow its dividend even amid industry ups and downs (^[2]). Management’s pattern of modest annual raises (~3% recently) signals confidence in the company’s cash flows and a shareholder-friendly capital return policy.

– Payout & Coverage: In 2023, Bristol Myers returned a total of $9.9 billion to shareholders through dividends and buybacks (^[5]) (^[5]). This was comfortably funded by $13.9 billion in operating cash flow for the year (^[5]). Even after capital expenditures, free cash flow covered the generous shareholder payouts. The dividend alone (approximately $5 billion annually) represents a moderate payout ratio relative to underlying cash profits, indicating that BMY’s dividend is well-covered by internal cash generation. (Note: AFFO/FFO metrics typically apply to REITs and are not used for pharma companies; instead, free cash flow is a key metric for dividend coverage.)

Leverage, Debt Maturities, and Coverage

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Bristol Myers has leveraged its balance sheet in recent years, mainly to fuel acquisitions and pipeline growth. Long-term debt now stands near $50 billion – roughly 50% higher than a year earlier – after a string of deals in 2023–2024 (^[2]). This puts BMY’s debt-to-equity ratio around 2.9 (^[2]), a level noticeably above many large-cap pharma rivals. The rising debt load is a red flag, but it comes with important context:

– Acquisition-Fueled Debt: BMY’s debt ballooned in part due to major acquisitions like the $14 billion purchase of Karuna Therapeutics (to boost its neuroscience pipeline) and the $4 billion buyout of cancer drugmaker RayzeBio (^[5]). These strategic moves aim to fill future revenue gaps, but they have added borrowing and one-time R&D charges. In fact, hefty acquired R&D write-offs pushed BMY to a GAAP loss in 2024 (–$4.41 EPS) despite growing revenue (^[6]) (^[7]). This underscores the execution risk of big-ticket acquisitions.

– Maturity Schedule: The good news is that BMY’s debt maturities are staggered and manageable in the near term. Only about $10.3 billion of long-term debt comes due over 2024–2028 (^[5]). For example, just $1.9B matures in 2025 and around $2.0B in each of 2026 and 2027 (^[5]) – amounts the company can likely refinance or repay with internal funds. BMY also maintains significant liquidity (including credit facilities extended to 2029) to handle these obligations (^[5]).

– Interest Coverage: Even with higher leverage, interest costs remain well-covered. Annual interest expense is roughly $1.3–1.4 billion for the next few years (^[5]), while 2023 operating income (before special charges) and cash flow were an order of magnitude higher. In short, BMY can comfortably meet its interest payments. The company’s robust cash flows and investment-grade credit rating help offset the risk of carrying a large debt load, though rising interest rates could gradually increase borrowing costs as debt rolls over.

In summary, BMY’s balance sheet is stretched but not strained: debt is high relative to equity, yet near-term maturities are relatively low and backed by strong cash generation. Investors should watch that debt trajectory – if BMY pursues more acquisitions or buybacks, will it further leverage up, or start paying debt down to a more peer-normal level once major deals are digested?

Valuation and Stock Performance

Bristol Myers’ stock currently trades at a deep discount by most measures. The combination of recent setbacks and future uncertainties has left BMY with a single-digit earnings multiple – a level that value-oriented investors find tempting, but that also reflects legitimate concerns.

– Earnings Multiple: Management expects 2025 adjusted earnings of $6.35–$6.65 per share (^[8]). At the current share price (mid-$40s), that translates to a forward P/E ratio around 7. This is well below the broader market (S&P 500 forward P/E ~18) and even below many pharma peers that trade in the low-teens. In other words, BMY is priced for a lot of bad news. The bargain valuation suggests significant investor skepticism around BMY’s growth prospects.

– Dividend Yield vs. Growth Trade-off: The flip side of the low P/E is BMY’s high dividend yield (~5%). Investors are essentially being paid generously to wait, but the market is implying that future earnings may decline (or at best stagnate). By comparison, stalwart peers like Merck or Johnson & Johnson yield closer to 2.5–3.5%, reflecting more confidence in their steady growth. BMY’s unusually high yield and low multiple can be interpreted as a “value trap” warning – the stock is cheap, but possibly for good reason if earnings erode in coming years.

– Stock Performance: BMY’s shares have underperformed the market lately. In 2023, the stock fell over 27% even after a brief bump from news of the Karuna acquisition (^[4]). The broader healthcare sector has also struggled – by mid-2025 the S&P 500 healthcare index was down 5% year-to-date vs. a solid gain for the overall market (^[9]). Investor sentiment toward pharma is weighed down by political price-pressure fears and company-specific setbacks. That said, some bargain hunters see opportunity: value-focused investors are rotating into names like Merck and BMY, noting that healthcare stocks are near 30-year low valuation levels (^[9]) (^[9]). Whether this is truly a contrarian opportunity or a trap will depend on how BMY navigates the challenges ahead.

In sum, BMY’s valuation is cheap on the surface – a ~7x forward earnings stock with a 5% yield is rare for a company of this size. For investors, the key question is whether this discount is an overreaction (pricing in a worst-case scenario that may not fully materialize) or a realistic reflection of tough times coming. That brings us to the risks and unknowns facing the company.

Risks, Red Flags, and Open Questions

Bristol Myers Squibb faces a convergence of risks that warrant careful consideration. The Camzyos trial failure is just one example of the challenges ahead for BMY’s portfolio and strategy. Here are the major risk factors and unanswered questions:

– Patent Cliff on Blockbusters: BMY is staring down the loss of exclusivity on several crucial drugs. Its blood thinner Eliquis (the company’s top seller) and cancer immunotherapy Opdivo will start to lose patent protection in the latter part of this decade (^[2]). This is after already absorbing hits from Revlimid (multiple myeloma drug) and Abraxane (chemotherapy), which began falling off the patent cliff in 2022 (^[2]). The result was two years of revenue declines for BMY (^[2]). Although growth resumed in 2023 thanks to Eliquis and newer products, the looming expirations present a major revenue gap ahead. Management has openly acknowledged these pressures and is preparing for future patent expirations and even Medicare price negotiations that will impact top drugs like Eliquis (^[7]). Investors must monitor how quickly BMY can replace lost sales from aging blockbusters.

– Pipeline and R&D Productivity: The heart-drug setback underscores the inherent risk in BMY’s pipeline. Not every experimental therapy will succeed or expand its label as hoped. BMY has a mix of promising prospects – for instance, new product launches like Reblozyl (for anemia) and the recently approved Cobenfy (a schizophrenia treatment) are contributing to growth (^[7]). Additionally, BMY’s cell therapy franchise (e.g. Breyanzi) and other pipeline candidates could help fill the gap. However, it’s a tall order: will BMY’s internal R&D produce the next Opdivo or Eliquis? The company’s “Growth Portfolio” (which includes newer drugs like Camzyos, Reblozyl, Opdualag, etc.) grew 17–18% in 2024 and is now about $22.6B of annual revenue (^[6]), helping offset declines in older drugs. Still, the pipeline needs to keep delivering successful products at an unprecedented pace to avert a future slide. The open question is whether the current roster of launched and in-development drugs can cumulatively generate tens of billions in new revenue by 2030 to replace what will be lost.

– Acquisition Strategy and Integration: BMY’s approach to the patent cliff has been to buy pipeline strength – exemplified by the megamerger with Celgene in 2019 and more recent acquisitions (MyoKardia in 2020 for Camzyos, Turning Point in 2022, Mirati in 2023, Karuna and RayzeBio announced in 2023, etc.). The strategy brings in promising assets, but it’s expensive and increases execution risk. Shareholders have reason to be wary: the Karuna deal ($14B for a Phase 3 schizophrenia drug) and others will only pay off if those drugs become successful, which is not guaranteed. Moreover, the integration of new companies and cultures can be challenging. Red flag: BMY’s flurry of acquisitions has contributed to significant goodwill/intangibles on the balance sheet and those big acquired R&D charges we saw in 2024 (^[7]). If any of these pipeline bets flop, BMY could face further write-downs. The company is essentially racing to outrun the patent cliff by purchasing future revenue – a high-risk, high-reward gamble. Open question: Will this acquisition spree ultimately secure BMY’s long-term growth, or could it lead to indigestion and debt burdens without fully solving the patent cliff? Investors will be watching the clinical results from these acquired programs (e.g., Karuna’s KarXT schizophrenia drug) closely in the next 1-2 years.

– High Leverage and Financial Flexibility: As discussed, BMY’s debt is high. While current cash flows cover interest easily, high debt could limit financial flexibility just when the company needs it most (to invest in R&D or make further strategic moves). If interest rates remain elevated, refinancing debt or issuing new debt for acquisitions becomes costlier. BMY’s balance sheet strength is a finite resource – management can’t keep adding debt indefinitely without consequences (credit rating downgrades, reduced ability to buy back shares or invest, etc.). The plan, presumably, is that today’s leveraged acquisitions will drive tomorrow’s growth, eventually allowing the debt to be paid down. Open question: At what point will BMY pivot from debt-fueled expansion to deleveraging? The answer may depend on how successfully it launches new drugs that boost earnings and cash flow.

– Regulatory and Pricing Pressure: The political environment around drug pricing is a chronic overhang for pharma stocks, and BMY is no exception. Upcoming Medicare price negotiations in 2026 will likely hit Eliquis pricing in the U.S., trimming one of BMY’s most profitable franchises (^[10]). Beyond that, the industry faces potential new regulations, pricing reform abroad, and pressure from payers to justify the cost of therapies. BMY has already signaled it expects some pricing headwinds and is engaging with policymakers (^[11]). This is less an acute risk than a slow bleed – over time, pricing power for drugs could erode, making it harder for BMY’s future products to reach the same peak sales as the last generation. Investors should watch developments in healthcare policy, as changes can directly impact BMY’s margins and growth.

– Operational Efficiency: On the cost side, BMY is taking action to buffer some of these headwinds. The company announced a $1.5 billion cost-savings initiative (including a 2,200 headcount reduction) to be completed by 2025 (^[7]). Tightening the belt may help protect earnings during the transition period of the next few years. However, aggressive cost cuts can only go so far without impairing future capabilities (e.g., cutting too much R&D or sales force could hinder growth). This raises a balancing act: BMY needs to stay lean, but not at the expense of the innovation and marketing muscle required to commercialize new therapies successfully.

Bottom line: Bristol Myers Squibb’s heart drug failure is a timely reminder of the uncertainties in drug development. For investors, BMY presents a mixed picture. On one hand, it’s a cash-generating, dividend-paying giant trading at valuations that price in a lot of pessimism. On the other hand, it’s a company in the middle of a strategic tightrope walk – replacing aging blockbusters with new winners, managing high debt, and navigating external pressures. The stock’s attractive yield and low multiple indicate a margin of safety if BMY can execute on its pipeline and integration plans. However, the risks of stumbles along the way (as evidenced by Camzyos in nHCM) are real.

Conclusion: Navigating BMY’s Future

For portfolio holders, what does all this mean? In the near term, BMY’s fundamentals remain solid – the company continues to post growth in its “new generation” products and maintains healthy cash flows and shareholder payouts. The Camzyos trial setback alone likely won’t derail financial performance (Camzyos is still a growing product for the approved use). But as a shareholder, you should approach BMY with eyes open to the longer-term risks. The next 3–5 years will be a critical period where Bristol Myers must execute almost flawlessly: successfully launch newly acquired drugs, squeeze out efficiencies, and sustain enough growth to offset the inevitable decline of older therapies.

If you believe BMY’s management can meet those challenges, today’s low valuation and rich dividend could make the stock a rewarding holding – a classic case of buying a strong company during a pessimistic phase. Indeed, some investors are starting to bargain-hunt in this name, citing the deep discount relative to the market (^[9]) (^[9]). However, if the company falters (e.g. key pipeline drugs fail or face delays, or new competition upends its plans), BMY could languish as a “value trap” despite its cheap metrics (^[9]) (^[9]).

Key things to watch going forward: progress of pipeline drugs (both in-house and those from acquisitions), any updates on major drug patent timelines or generic entrants, management’s capital allocation (debt paydown vs. more deals vs. buybacks), and the impact of healthcare policy changes on BMY’s pricing. Each of these will influence whether Bristol Myers Squibb can transform its current challenges into the next chapter of growth – or if the stock’s generous yield will end up compensating investors for a bumpy ride.

Sources: Bristol Myers Squibb Investor Relations; U.S. SEC filings; Reuters and AP News reporting; The Motley Fool and Nasdaq (BNK Invest) analysis (^[1]) (^[1]) (^[2]) (^[2]) (^[5]) (^[8]) (^[9]) (^[9]) (^[7]) (^[7]) and others as cited in-line.

Sources

For informational purposes only; not investment advice.