Bristol‐Myers Squibb Co
NYSE: BMY Student Investment Fund Stock Report Analysts: Mat Overbaugh & Zachary Wilson Recommendation: Buy/Limit Order Market Cap: $50.28B Recent Price: $25.38 (11/27/09)
Target Price: $24.38 Sector: Healthcare Sub‐Sector: Drug Manufacturers Recommendation 
Limit Order with a $24.15 Strike Price Overview and Highlights  Bristol‐Myers Squibb is a leading worldwide healthcare company focused on the development and sale of name‐brand pharmaceuticals.  With fifty‐one drugs, BMY has an above‐average pipeline with compounds that have blockbuster potential in key therapeutic areas  BMY has increased or maintained dividend payments every year for thirty‐nine years, even during periods that saw earnings per share decline.  BMY has a solid and proven track record of cutting costs and is on pace to achieve $2.5B in annual cost savings by 2012.  BMY is set to finish FY 2009 with $10B in cash on the balance sheet.  BMY is currently divesting out of all non‐biopharma assets to transform into a next generation BioPharma company.  BMY faces a steep patent cliff through 2015. Patent expirations of key drugs Plavix, Abilify, and Avapro will put over 30% of BMY’s TTM revenue at risk. Investment Thesis
 Worldwide, the Pharmaceutical business is around $785B. IMS Health, a leading provider of market healthcare research, predicts an annual growth rate of 4% ‐ 7%.  Bristol‐Myers has taken aggressive measures to combat the patent cliff, an industry wide problem in which the R&D engine cannot create new products to fill voids left by patent expirations on existing drugs.  With a healthy ROIC v. WACC spread protected by legal patents, BMY continues to create and deliver value to shareholders with a sustainable 5.01% dividend yield.  While healthcare reform remains a risk, prescription medication remains the most cost‐effective treatment method used by modern medicine. Insider Trading – Net Purchases Financial Statistics vs. the Industry
Economic Summary & Industry Analysis Economic fundamentals remain weak with unemployment over 10% and consumer spending down significantly. While there are many things people have chosen to live without in the downturn, pharmaceutical isn’t one of them. Throughout the down economy revenue of pharmaceutical companies has continued to grow. The resiliency of pharmaceutical sales, strong cash flows, and attractive dividend yields make the bio‐pharma sector an attractive choice in uncertain economic times. The chart shows the outperformance of the bio‐pharma index vs. S&P 500 over the past two years. Source: Kaiser Family Foundation (www.statehealthfacts.org) It’s important to note that pharmaceutical products sold by Bristol‐Myers extend life. Even in a down economy, people will pay for life‐saving medication. An aging world population will fuel consistent growth in pharmaceutical sales. Despite the near term domestic threat of healthcare reform, the pharmaceutical industry is positioned to increase revenues over the next several decades thanks to a rapidly aging world population that is increasingly dependent on life‐extending medication. The United Nations projects that the number of people over the age of sixty will nearly quadruple by 2050 to almost 2 billion. An aging population requires more medication to stay healthy and active. Source: United Nations The average number of prescriptions filled annually by age group shows the explosive growth in prescriptions filled for the 65+ age group. The pending patent cliff over the next 10 years is an industry wide problem. Across the industry over $74B worth of branded drugs will lose patent protection by 2012. The fast approaching patent cliff has led healthy companies to pursue acquisition and licensing strategies instead of internal product development to expand their pipeline and get drugs to market more quickly. Many major drug companies have turned to diversification to help cushion the revenue blow of the pending patent cliff. This plan provides for more consistent revenue but at the cost of operating margins. The other path, the one BMY has undertaken, is to focus on core competencies, cut costs, aggressively expand margins, and grow the pipeline through pharmaceutical and biologic acquisitions. Roughly half of the acquisitions by big pharmaceutical over the past decade have been in “ex‐
pharmaceutical” sectors such as OTC products, medical devices, animal health, and retail pharmacy. However, firms that have 90% or more of 2008 revenues from pharmaceutical sales had above average margins, where those that have diversified showed below average operating margins. The fury of acquisitions in big pharmaceutical is likely to continue as each company continues on its respected path to dampen the impacts of the pending patent cliff. Healthy cash rich companies, like BMY, will be the ones that take full advantage of current tight credit markets to continue to expand pipelines or diversify through acquisitions. Domestic healthcare reform could completely change the healthcare system, including pharmaceuticals. The current health care reform under consideration includes a Medicare Part D clawback, public plan option, Medicare/Medicaid cuts, and legislation for the approval of biosimilars to name a few of its points. Significant changes are likely to directly affect the pharmaceutical industry. This includes fees to help cover the “donut hole” in Medicare Part D. Pharmaceutical companies are also at risk from decreased subsidies from Medicare/Medicaid, increasing pressure for use of generics, and the push through of biosimilar legislation. These areas of reform would negatively impact the industry. However, big pharmaceutical has taken an active role in the legislative process thus far. PhRMA, the biggest trade association for the prescription drug industry, worked directly with President Obama to get a compromise in place. The current deal that has been struck calls for an $80B payment from pharmaceutical companies that will cover costs not covered by Medicaid. While this is viewed as a compromise between congress and PhRMA, the street has viewed it as a win for big pharma. Geographical diversification will also play a part in what percent of revenues are at stake for reform. BMY’s international revenue represented 42% of total TTM sales
We assumed significant revenue loss in 2012E and 2015E which represents lost revenue due to patent expirations, specifically Plavix and Abilify. Modeling Results As of 12/4 BMY traded with a Dividend Yield just over 5%. BMY has historically increased dividend payments even when EPS fell. We project a continued increase in DPS throughout the forecast. With such a high dividend yield it is important to verify that Bristol‐Myers will be able to sustain it. One method of financial stability is the Piotroski’s Financial Fitness Scorecard. Financial Modeling Modeling Approach When modeling Bristol‐Myers several assumptions were used to ensure BMY represents a sound investment for the Washburn Student Investment Fund. Our assumptions assume a less than ideal environment for BMY. Our model assumed a 2.5% terminal growth rate and used an increased beta. Additionally, we increased SG&A, R&D and Net PPE. This would represent a reversal to a successful cost cutting trend (the Productivity Transformation Initative, above) but would serve to dampen valuations by increasing the cost of capital and decreasing effeciency on the balance sheet. We used an average revenue growth slightly below 5%. This is below Thompson‐Baseline’s predicted 6% and is in line with the IMS Health prediction of 4% ‐ 7% growth for the industry. BMY shows an average value well above 8 indicating that BMY has a solid financial foundation. Additionally, BMY scores well in the safe zone on the Altman Z‐Score Bankruptcy test which suggests that BMY has no significant risk of bankruptcy. Bristol‐Myers sustains this financial stability through a strong value‐creation engine. The spread between ROIC and WACC averages 20% throughout the forecast. This spread is well protected by legal patents. While Economic Value Added takes a slight dip in 2009E due to the conservative modeling approach and two more slight dips in 2012E and 2015E due to patent expirations, BMY is able to increase Market Value Added throughout the forecast. A portfolio of low correlation stocks will decrease the volitility of the portfolio as a whole. Exclusing indexes, BMY does not have a correlational coefficient over .48 with any stock held in the fund. Bristol‐Myers continues to have significant upside for capital gains. The well‐positioned drug could likely generate a surprise blockbuster drug. Furthermore, macro‐economic trends regarding an aging and increasingly unhealthy population could provide a tailwind to Bristol‐Myers’ revenue as modern medicine dictates prescription medication as the first and most cost effective treatment. Our forecasts represent Bristol‐Myers’ performance in a less than ideal environment. Bristol‐Myers should meet and likely surpass our conservative modeling assumptions making our discounted cash flow target price a conservative estimate. Management and Business Initiative Recommendation Due to Bristol‐Myers strong dividend, healthy balance sheet and strong pipeline we view BMY as an attractive buy and hold stock for the Student Investment Fund at or below $24.15 per share. That price would secure a sustainable 5.13% dividend yield for the Studend Investment Fund. In addition to being an attractive investment based on fundamental analysis, Bristol‐Myers offers a low correlational coefficient to the stocks held in the fund. We view BMY’s management team as an asset to the company. Since the 2006 appointment of James Cornelius as CEO the company has significantly grown revenues and cut costs through two key strategies titled “string of pearls” for its pipeline expansion strategy, and “PTI” for its productivity transformation initiative strategy. BMY’s management has strengthened the company’s balance sheet through divesture of non‐biopharma assets, addressed the coming patent cliff head on, shown restraint in acquisition pricing, and successfully increased operating leverage through cost cutting initiatives. “String of Pearls” Strategy In 2007 BMY launched a new strategy titled “string of pearls”. The new strategic plan sought to acquire new compounds, pipelines, and companies that would strategically help address areas not currently covered by the company, or build onto its existing pipeline. The strategy also has led to the divestiture of non‐core businesses. Over the past two years BMY has sold its OTC line, its generics businesses, medical supply division, and most recently is in the process of spinning of its nutritionals business, Mead Johnson, to shareholders. These divestures have improved operating margins, and provided significant cash to allow for the “string of pearls” strategy to continue while building an even larger war chest. The most recent, and the eight pearl acquired, was Medarex. Through the $2.1B acquisition of Medarex BMY gained full rights to phase III monoclonal antibody Ipilimumab, and Medarex’s state of the art biologics platform. Other firms full acquired are Kosan Bioscience ($235m) and Adnexus Therapuetics ($430m). The other pearls have been acquired through partnering agreements such as with AZN and Pfizer, as well as purchasing licensing agreements. While the company has been aggressive in its pursuit of promising compounds and companies it has shown restraint in regards to price. BMY walked away from a bidding war with LLY for ImClone after LLY bid up the price 20% over BMY’s offer. Below is a graph of some of the anticipated launch dates of some of the drugs developed/acquired through this strategy, with Onglyza being the first to be approved in July of 2009. In connection with the PTI, the Company aims to achieve a culture of continuous improvement to enhance its efficiency, effectiveness and competitiveness and to substantially improve its cost base. BMY has already achieved annual cost savings of $1.5B through the PTI strategy, and is on pace to reach its goal of another $1B by 2012. It has reduced its number of manufacturing facilities, decreased its geographic footprint, sold and spun off non‐biopharma assets, and reduced its sales force by over 50%. This has led to expanding margins, and has had no negative impact to revenue growth. Investment Risks Healthcare Reform Healthcare reform may be more prohibitive to pharmaceutical companies than anticipated. The drug industry’s share of cuts to Medicare/Medicaid in the bill’s current form appears to be about $80‐$110B over the next ten years according to industry experts. This sum represents about 3‐4% of US pharma 2008 sales. It is estimated that the 30‐40m estimated people additionally insured through the current reform bill would likely increase drug pharmaceutical revenues creating a neutral impact on drug companies. If reform were to turn unfavorable on drug companies, it could cause a compression to earnings that is not in our forecast. Similarly, if reform continues to be delayed or becomes watered down through the approval process, drug companies could experience a positive change in investor sentiment in the short term. Mergers and Acquisitions Productivity Transformation Initiative A change in BMY’s acquisition strategy could negatively affect our forecast. As BMY states “the Company’s productivity transformation initiative is designed to fundamentally change the way it runs its business to meet the challenges of a changing business environment, to take advantage of the diverse opportunities in the marketplace as the Company is transforming into a next‐generation biopharmaceutical company, and to create a total of $2.5 billion in annual productivity cost savings and cost avoidance by 2012. BMY currently is operating under an acquisition strategy called “string of pearls”. Through the strategy, BMY has been able to strategically acquire small biotech companies, compounds, platforms, and build collaborative partnership to help expand its pipeline. BMY will likely continue this acquisition strategy but may consider acquiring a large company, which could cause earnings dilution and put their attractive dividend at risk. Recent moves by Merck/Schering Plow, Pfizer/Weth, and Roche/Genentech have brought the megamerger back to big pharmaceutical companies. Furthermore, this trend has put BMY on the list of potential takeout targets. An acquisition of BMY would provide a significant premium to shareholders. We view the acquisition of BMY by another firm as less likely in the near term due to current market conditions. Patent Expiration BMY’s patent cliff may be more severe than forecasted. BMY faces a large patent cliff with the expiration of patents to some of its best selling drugs through 2015. Plavix, BMY’s top selling drug, represents about 20% of 2008 revenues. While our forecast does anticipate a revenue contraction of 10% in 2012 and 5% in 2015 for the expiration of patents to Plavix and Abilify, revenues could face a steeper decline. A steeper decline in sales due to a quicker uptake of generics or failure of BMY’s pipeline to replace revenues could have a detrimental impact on our forecasted valuation. Competition Increased competition in BMY’s marketed products and pipeline could derail our forecast. BMY is in constant competition with other large pharmaceutical companies for sales of their marketed products as well as development of pipeline drugs. BMY faces competition in a number of its products. Plavix has new competition from Eli Lilly’s Efficient, Abilify is competing with AstraZeneca’s Seroquel and Pfizer’s Geoden, and Onglyza is in direct competition with Merck’s Januiva. Similarly BMY’s phase III diabetes treatment Dapagloflozin may have to compete with SLGT‐2 inhibitors from JNJ and GSK. An increase in competition above our estimates could put our valuation of BMY at risk. However, on several of these fronts, BMY is currently well positioned. Onglyza has a competitive advantage in the DDP‐4 space being the only once daily treatment, and Plavix is still experiencing strong sales thanks to a much slower than expected adoption of LLY’s Efficient. BMY – Revenue Forecast by Product BMY is experiencing double‐digit growth in several key franchises. While Plavix and Ability will begin facing stiff generic competition BMY has several key franchises that have blockbuster potential. Plavix
(Clopidogrel Bisulfate)
Plavix is BMY’s best selling drug with 2008 sales of $5.6B making up over 20% of BMY’s total sales. Plavix is used to help protect against future heart attack or stroke and is the biggest seller in the space. LLY recently launched Efficient, a direct competitor to Plavix. Despite favorable clinical trials, Efficient has struggled to steal market share from Plavix in the time since its 2008 launch. Plavix has continued to grow sales through 2009 but will lose patent protection in 2012, and it will face stiff competition from multiple generics. Sprycel
(Dasantinib)
Sprycel was launched in 2006 as a second line treatment for chronic myeloid leukemia (CML). Gleevec is the biggest competitor in the space, but Sprycel fills a void in the marketplace by being the only advanced SRC inhibitor with demonstrated efficacy and safety in patients with solid tumors that are resistant to Gleevec. In May of 2009, the FDA approved Sprycel for treatment in all three stages of CML for those with resistance or intolerance for other therapies. Sprycel is also in trials for breast and prostate cancer, and a recent study released by UCLA scientists show Sprycel significantly inhibited the growth and promoted the death of ovarian cancer cells, a disease that currently has few effective therapies. Approval of Sprycel for another cancer treatment would greatly increase its forecasted sales potential. Abilify (Aripiprazole)
Abilify was recently approved by the FDA for its fifth indication. Abilify is currently approved for the treatment of schizophrenia, bipolar I disorder, depression add‐on, agitation associated with schizophrenia or bipolar depression, and most recently for irritability in children with autism. In April of 2009, BMY extended its exclusivity agreement with Otsuka to allow for an additional 29 months of exclusivity marketing Abilify. This will allow BMY to hold exclusivity through the Plavix patent expiration. In exchange, BMY will be recognizing Abilify sales on a tiered scale, and will share a percentage of revenue from its oncology line as well. Virology Franchise: Baraclude Reyataz Sustiva Orencia (abatacept)
(Entecavir)
(Atazanavir)
(Efavirenz) BMY’s virology franchise treats HIV/AIDS and Hepatitis B. Sustiva a consistent grower loses patent protection at the end of 2013, followed by Baraclude in 2015, and Reyataz in 2017. Sustiva is the one of the three that currently has a generic filed to compete. Despite the patent expiration issues, BMY should experience consistent growth in Sustiva up till patent expiration. BMY should continue to experience strong growth in Baraclude behind new study results that show it has twice the efficacy rate and is just as safe as its biggest competitor Adefovir. Reyataz should experience accelerated growth behind its FDA approval as a once daily treatment with a higher efficacy rate than its biggest competitor ABT’s Kaletra ($1.5B sales). Dapagloflozin (Saxagliptin)
Onglyza is BMY’s newest approved drug. It is the second approved DDP‐4 inhibitor approved by the FDA along with MRK’s Januvia. DDP‐4 inhibitors are forecasted to $7B in sales by 2015. New FDA approval requirements prevent any Orencia was approved in 2006 for the second‐line treatment of adult RA (Rheumatoid Arthritis), and juvenile idiopathic arthritis. The FDA recently approved Orencia as a first line treatment for individuals with moderate to severe RA, as well as for children over the age of 6 with idiopathic arthritis. In clinical trials Orencia has shown higher efficacy rates with improved safety over current RA treatments. Orencia stands to see strong growth with the new broader use label approved by the FDA. Approximately 2 million people in the US are living with RA. Orencia is the first T‐cell co‐
stimulation modulator approved for the treatment of rheumatoid arthritis (RA). Pipeline Products The below forecast were completed prior to recent FDA approvals for the franchise drugs. Onglyza new entrants from receiving approval prior to 2012 leaving Onglyza and Januvia in a two horse race. Onglyza is the only once a day DDP‐4 inhibitor and is offered in a smaller dose/pill. In head to head trials, Onglyza showed the same efficacy rate and safety as Januvia. The treatment of type‐2 diabetes is one of the most lucrative and fastest growing disease areas currently in medicine. DDP‐4 inhibitors can be combined with other diabetes treatments to help control blood glucose levels. Onglyza was co‐developed with AZN and both costs and revenues will be split equally between the two firms. Dapagloflozin is another diabetes treatment being co‐
developed by BMY and AZN. Dapagloflozin is a once daily first in class SGLT‐2 inhibitor for the treatment of type‐2 diabetes. This drug helps control blood glucose levels by targeting the SGLT‐2 receptor which is responsible for glucose excretion in urine. Because of its impact on glucose excretion Dapagloflozin has also shown weight loss advantages and lowered blood pressure in clinical trials. The Diabetes Market is one of the most lucrative with over 20 million Americans currently diagnosed with diabetes and 54 million considered prediabetic according to the CDC. Recent results from phase III trials released in October show better than expected results in controlling glucose levels and its ability to be partnered with other diabetes treatments. The results were released at the IDF (International Diabetes Federation) meeting in Montreal. One IDF presenter noted, in his practice, he would “use it in combination with every other type of agent.” Ipilimumab Apixaban Ipilimumab is fully human monoclonal antibody that BMY gained full rights to through its recent acquisition of Medarex earlier this year. It is in phase III trials for Malignant Melanoma and in phase II trials for the treatment of prostate cancer. A Pharmacor report titled Malignant Melanoma estimates that the launch of BMY’s Ipilimumab will significantly increase the size of the malignant melanoma market. There is currently a huge unmet need for life extending treatment in those with late skin cancer. Pharmacor reports they anticipate Ipilimumab to grow at 17% annually from a launch in 2012 to 2017, with it consuming a third of the total malignant melanoma treatment market by 2017. These results are dependent on continued success in phase III trials. Ipilimumab could experience even greater growth through sales in treating prostate cancer. Prostate cancer would be the single largest market for a monoclonal antibody treatment with over 192,000 new cases diagnosed each year in the US. Apixaban is an oral anticoagulant currently in phase III trials for the treatment of venous thromboembolism (VTE) following knee and hip surgery, atrial fibrillation (AF), and acute coronary syndrome (ACS). The drug is currently enrolling its phase III clinical trials for treatment of AF and ACS compared to the current treatment Warfarin. A once daily pill has shown the highest efficacy rates but with slightly higher risks of bleeding, a downside to the treatment. Apixaban is the second Xa inhibitor currently in development behind JNJ’s Xarelto. Apixaban is being co‐developed by BMY and Pfizer. Belatacept Belatacept a first‐in‐class co‐stimulation blocker which selectively inhibits T‐cell activation is in phase III trials to prevent organ transplant rejection. The current treatment use of Cyclosporine is known to cause significant problems such as increased cardiovascular and metabolic risk. Belatacept has shown higher efficacy rates and safety rates in head to head comparisons with Cyclosporine in earlier trials. Belatacept is currently under review by the FDA and could be approved in late 2010. BMY Technical Appendix, Page 1 of 8
A
B
C
D
E
1
2
3
Enter Firm Ticker
BMY
4
values in millions
5
Historical Income Statements
6
7
8
9
Enter first financial statement year in cell B6
Total revenue
Cost of goods sold
Gross profit
F
G
H
I
J
K
L
M
N
Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in
the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether
the historical average is truly representative of what the firm can achieve in the future.
2004
Forecasting Percentages
2005
19,380
2006
18,605
2007
16,208
2008
18,193
2004
20,597
Revenue Growth
COGS % of Sales
5,989
5,737
5,420
5,868
6,396
13,391
12,868
10,788
12,325
14,201
2005
30.9%
2006
2007
2008
-4.0%
-12.9%
12.2%
13.2%
Average
1.5%
30.8%
33.4%
32.3%
31.1%
31.7%
Manual
10
SG&A expense
6,427
6,453
5,773
5,931
6,342
SG&A % of Sales
33.2%
34.7%
35.6%
32.6%
30.8%
33.4%
31.0%
11
Research & Development
2,500
2,678
2,951
3,227
3,585
R&D % of Sales
12.9%
14.4%
18.2%
17.7%
17.4%
16.1%
17.5%
12
Depreciation/Amortization
0
0
0
0
0
D&A % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
13
Interest expense (income), operating
0
0
0
0
0
Inc. Exp. Oper.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
14
Non-recurring expenses
161
429
391
Exp. Non-rec
1.4%
-1.4%
1.0%
2.4%
1.9%
1.0%
-0.8%
-1.2%
1.8%
-0.7%
-0.9%
-0.3%
15
16
Other operating expenses
Operating Income
267
(158)
(268)
(222)
292
(119)
(180)
4,418
4,304
2,085
3,186
5,471
Other exp.
17
Interest income (expense), non-operating
0
0
0
0
0
Int. inc. non-oper.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
18
19
Gain (loss) on sale of assets
Other income, net
0
0
0
0
0
0
0
0
0
0
Gain (loss) asset sales
Other income, net
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4,418
4,304
2,085
3,186
5,471
1,519
870
431
682
1,320
Tax rate
34.4%
20.2%
20.7%
21.4%
24.1%
24.2%
2,899
3,434
1,654
2,504
4,151
Minority interest
-2.7%
-3.2%
-2.7%
-4.2%
-4.8%
-3.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
20
21
Income before tax
Income tax
22
Income after tax
23
Minority interest
24
25
Equity in affiliates
U.S. GAAP adjustment
26
27
Net income before extraordinary items
Extraordinary items, total
28
Net income
29
Total adjustments to net income
30
Basic weighted average shares
31
Basic EPS excluding extraordinary items
32
Basic EPS including extraordinary items
33
Diluted weighted average shares
34
(521)
(592)
(440)
(763)
(996)
0
0
0
0
0
0
0
0
0
0
2,378
2,842
1,214
1,741
3,155
10
158
371
424
2,092
2,388
3,000
1,585
2,165
5,247
5
0
0
0
0
1,942
1,952
1,960
1,970
1,977
1.22
1.46
0.62
0.88
1.60
1.23
1.54
0.81
1.10
2.65
1,976
1,983
1,963
1,980
2,001
Diluted EPS excluding extraordinary items
1.20
1.43
0.62
0.88
1.58
35
Diluted EPS including extraordinary items
1.21
1.51
0.81
1.09
2.62
36
Dividends per share -- common stock
1.12
1.12
1.12
1.15
1.24
37
Gross dividends -- common stock
2,176
2,187
2,204
2,275
2,460
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Retained earnings
212
813
(619)
(110)
2,787
Equity in affiliates
U.S. GAAP adjust.
Extrordinary items
Too unpredictable to forecast, set to zero in the forecasts
Adjustments to NI
Too unpredictable to forecast, set to zero in the forecasts
Share growth
0.5%
0.4%
0.5%
0.4%
0.4%
Diluted share growth
0.4%
-1.0%
0.9%
1.1%
0.3%
Dividend growth
0.5%
0.8%
3.2%
8.1%
3.1%
BMY Technical Appendix, Page 2 of 8
O
1
2
3
P
Q
4
Year-by-year dividend growth
5
Year-by-year revenue growth
5.00%
7
9
10
S
T
U
V
W
X
Y
Z
6.00%
5.00%
-10.00%
5.00%
5.00%
-5.00%
4.00%
4.00%
4.00%
Forecasted Income Statements -- 10 Years
6
8
R
Revenues grow at the same rate each year unless a growth value is manually entered in the cell above the forecast year, in which case the year-by-year value overrides the
historical or manual average. It makes sense to start tapering the growth forecasts 5 or 6 years into the forecast period.
year
Total revenue
Cost of goods sold
Gross profit
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
21,627
22,924
24,071
21,664
22,747
23,884
22,690
23,598
24,541
6,855
7,266
7,630
6,867
7,210
7,571
7,192
7,480
7,779
25,523
8,090
14,772
15,658
16,441
14,797
15,537
16,314
15,498
16,118
16,762
17,433
11
SG&A expense
6,704
7,107
7,462
6,716
7,052
7,404
7,034
7,315
7,608
7,912
12
Research & Development
3,785
4,012
4,212
3,791
3,981
4,180
3,971
4,130
4,295
4,467
13
Depreciation/Amortization
0
0
0
0
0
0
0
0
0
0
14
Interest expense (income), operating
0
0
0
0
0
0
0
0
0
0
15
Non-recurring expenses
224
238
250
225
236
248
235
245
255
265
16
Other operating expenses
(75)
(80)
(84)
(75)
(79)
(83)
(79)
(82)
(85)
17
18
19
Operating Income
Interest income (expense), non-operating
Gain (loss) on sale of assets
4,133
(372)
0
4,381
(373)
0
4,600
(360)
0
4,140
(195)
0
4,347
(193)
0
4,565
(188)
0
4,337
(81)
0
4,510
(72)
0
4,690
(61)
0
(89)
4,878
(47)
0
20
Other income, net
0
0
0
0
0
0
0
0
0
0
21
Income before tax
3,761
4,008
4,241
3,945
4,154
4,377
4,255
4,438
4,630
4,831
909
968
1,025
953
1,004
1,058
1,028
1,072
1,119
1,167
2,852
3,040
3,216
2,992
3,151
3,320
3,227
3,366
3,511
3,664
22
23
24
25
26
27
28
Income tax
Income after tax
Minority interest
Equity in affiliates
U.S. GAAP adjustment
Net income before extraordinary items
Extraordinary items, total
29
Net income
30
Total adjustments to net income
31
Basic weighted average shares
(762)
0
(808)
0
(848)
0
(763)
0
(801)
0
(841)
0
(799)
0
(831)
0
(865)
0
(899)
0
0
0
0
0
0
0
0
0
0
0
3,614
3,848
4,064
3,755
3,952
4,161
4,027
4,197
4,376
4,563
0
0
0
0
0
0
0
0
0
0
3,614
3,848
4,064
3,755
3,952
4,161
4,027
4,197
4,376
4,563
0
0
0
0
0
0
0
0
0
0
1,986
1,995
2,004
2,013
2,022
2,031
2,040
2,049
2,058
2,067
2.21
32
Basic EPS excluding extraordinary items
1.82
1.93
2.03
1.87
1.95
2.05
1.97
2.05
2.13
33
Basic EPS including extraordinary items
1.82
1.93
2.03
1.87
1.95
2.05
1.97
2.05
2.13
2.21
34
Diluted weighted average shares
1,983
1,992
2,001
2,010
2,019
2,028
2,037
2,046
2,055
2,065
35
Diluted EPS excluding extraordinary items
1.82
1.93
2.03
1.87
1.96
2.05
1.98
2.05
2.13
2.21
36
Diluted EPS including extraordinary items
1.82
1.93
2.03
1.87
1.96
2.05
1.98
2.05
2.13
2.21
37
Dividends per share -- common stock
1.28
1.31
1.35
1.38
1.42
1.46
1.49
1.53
1.58
1.62
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Gross dividends -- common stock
Retained earnings
2,537
1,078
2,616
1,232
2,697
1,367
2,781
974
2,868
1,084
2,957
1,204
3,049
977
3,144
1,053
3,242
1,134
3,343
1,220
BMY Technical Appendix, Page 3 of 8
AA
AB
AC
AD
AE
1
2
3
Enter Firm Ticker
BMY
4
values in millions
5
Historical Balance Sheets
6
year
7
Assets
AF
AG
AH
AI
AJ
AK
AL
AM
2004
Forecasting Percentages
2005
2006
2007
2008
2004
2005
2006
2007
2008
Average
8
Cash & equivalents
3,680
3,050
2,018
1,801
7,976
Cash % of Sales
19.0%
16.4%
12.5%
9.9%
38.7%
9
Short term investments
3,794
2,749
1,995
424
289
ST Invest. % of Sales
19.6%
14.8%
12.3%
2.3%
1.4%
10.1%
10
Receivables, total
4,373
3,378
3,247
3,994
3,710
Receivables % Sales
22.6%
18.2%
20.0%
22.0%
18.0%
20.1%
11
Inventory, total
1,830
2,060
2,079
2,162
1,765
Inventory % of Sales
9.4%
11.1%
12.8%
11.9%
8.6%
10.8%
12
Prepaid expenses
319
270
314
310
320
Pre. Exp. % of Sales
1.6%
1.5%
1.9%
1.7%
1.6%
1.7%
13
Other current assets, total
805
776
649
1,411
703
Other CA % of Sales
4.2%
4.2%
4.0%
7.8%
3.4%
4.7%
14,801
12,283
10,302
10,102
14,763
14
Total Current Assets
Property, plant and equipment (net)
5,765
5,693
5,673
5,650
5,405
Net PPE % of Sales
29.7%
30.6%
35.0%
31.1%
26.2%
30.5%
16
Goodwill
4,905
4,823
4,829
4,998
4,827
Goodwill % of Sales
25.3%
25.9%
29.8%
27.5%
23.4%
26.4%
17
Intangibles
2,260
1,921
1,852
1,330
1,151
Intangibles % of Sales
11.7%
10.3%
11.4%
7.3%
5.6%
9.3%
18
19
Long term investments
Notes receivable -- long term
0
0
0
0
0
0
0
0
0
0
LT Invest. % of Sales
Notes Rec. % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
20
Other long term assets, total
2,704
3,418
2,919
3,846
3,406
Other LT ass. % Sales
14.0%
18.4%
18.0%
21.1%
16.5%
17.6%
21
Other assets, total
0
0
0
0
0
Other assets % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
30,435
28,138
25,575
25,926
29,552
23
Total assets
Liabilities and Shareholders' Equity
24
25
Accounts payable
Payable/accrued
2,127
0
1,579
0
1,239
0
1,442
0
1,535
0
Acc. Payable % Sales
Pay/accured % Sales
11.0%
0.0%
8.5%
0.0%
7.6%
0.0%
7.9%
0.0%
7.5%
0.0%
8.5%
0.0%
26
Accrued expenses
4,233
3,870
3,663
3,919
3,780
Acc. Exp. % of Sales
27
Notes payable/short term debt
1,883
231
187
1,891
154
28
Current portion of LT debt/Capital leases
0
0
0
0
0
29
Other current liabilities
1,600
1,210
1,407
1,146
1,241
30
Total Current Liabilities
9,843
6,890
6,496
8,398
6,710
31
Long term debt, total
8,463
8,364
7,248
4,381
6,585
32
Deferred income tax
0
0
0
0
0
33
Minority interest
0
0
0
0
0
Min. Int. % of Sales
34
Other liabilities, total
1,927
1,676
1,840
2,585
4,016
Other liab. % of Sales
17,311
35
20,233
16,930
15,584
15,364
36
Preferred stock (redeemable)
0
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Total Liabilities
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Diluted weighted average shares
Total preferred shares outstanding
220
2,491
19,651
(11,311)
0
(849)
10,202
30,435
1,976
0
220
2,528
20,464
(11,168)
0
(836)
11,208
28,138
1,983
0
220
2,498
19,845
(10,927)
0
(1,645)
9,991
25,575
1,963
0
220
2,722
19,762
(10,584)
0
(1,558)
10,562
25,926
1,980
0
220
2,828
22,549
(10,566)
0
(2,790)
12,241
29,552
2,001
0
21.8%
20.8%
22.6%
21.5%
18.4%
21.0%
Notes payable % Sales
9.7%
1.2%
1.2%
10.4%
0.7%
4.7%
Curr. debt % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Other curr liab % Sales
8.3%
6.5%
8.7%
6.3%
6.0%
7.2%
LT debt % of Sales
LT debt is manually adjusted for AFN in the pro formas
Def. inc. tax % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
9.9%
9.0%
11.4%
14.2%
19.5%
12.8%
0.0%
Set to last historical year's level throughout the forecasts.
Set to last historical year's level throughout the forecasts.
The
usesthe
themore
more
conservative
diluted
Themodel
model uses
conservative
diluted
common
common
sharesfornumber
for total
shares outstanding.
shares number
total shares
outstanding.
Diluted share growth
Preferred share growth
0.4%
-1.0%
0.9%
1.1%
Manual
19.3%
15
22
AN
Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the
manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the
historical average is truly representative of what the firm can achieve in the future.
0.3%
27.0%
BMY Technical Appendix, Page 4 of 8
AO
1
2
3
4
AP
AQ
AR
AS
AT
AU
AV
AW
AX
AY
AZ
Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries to zero and use Goal
PPE/Sales
Forecasted Balance Sheets -- 10 Years
5
6
year
7
Assets
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
8
Cash & equivalents
4,172
4,422
4,644
4,179
4,388
4,608
4,377
4,552
4,734
4,924
9
Short term investments
2,180
2,311
2,426
2,183
2,293
2,407
2,287
2,378
2,474
2,572
10
Receivables, total
4,357
4,618
4,849
4,364
4,582
4,811
4,571
4,753
4,944
5,141
11
Inventory, total
2,327
2,466
2,590
2,331
2,447
2,570
2,441
2,539
2,640
2,746
12
Prepaid expenses
359
380
399
359
377
396
376
391
407
423
13
Other current assets, total
1,016
1,077
1,131
1,018
1,069
1,122
1,066
1,109
1,153
1,199
14
14,410
15,275
16,039
14,435
15,156
15,914
15,119
15,723
16,352
17,006
15
Property, plant and equipment (net)
5,839
6,190
6,499
5,849
6,142
6,449
6,126
6,371
6,626
6,891
16
Goodwill
5,707
6,049
6,351
5,716
6,002
6,302
5,987
6,227
6,476
6,735
17
Intangibles
2,003
2,123
2,230
2,007
2,107
2,212
2,102
2,186
2,273
2,364
18
19
Long term investments
Notes receivable -- long term
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
20
Other long term assets, total
3,807
4,035
4,237
3,813
4,004
4,204
3,994
4,154
4,320
4,493
21
Other assets, total
0
0
0
0
0
0
0
0
0
0
31,766
33,672
35,356
31,820
33,411
35,082
33,328
34,661
36,047
37,489
1,838
0
1,948
0
2,045
0
1,841
0
1,933
0
2,029
0
1,928
0
2,005
0
2,085
0
2,169
0
22
23
Total Current Assets
Total assets
Liabilities and Shareholders' Equity
24
25
Accounts payable
Payable/accrued
26
Accrued expenses
4,548
4,820
5,061
4,555
4,783
5,022
4,771
4,962
5,160
5,367
27
Notes payable/short term debt
1,006
1,066
1,119
1,008
1,058
1,111
1,055
1,097
1,141
1,187
28
Current portion of LT debt/Capital leases
29
Other current liabilities
30
Total Current Liabilities
8,938
9,474
9,948
8,953
31
Long term debt, total
6,741
6,712
6,408
3,201
32
Deferred income tax
0
0
0
0
33
Minority interest
0
0
0
34
Other liabilities, total
2,769
2,935
35
0
0
0
0
0
0
0
0
0
1,640
1,722
1,550
1,627
1,708
1,623
1,688
1,755
1,826
9,401
9,871
9,377
9,752
10,142
10,548
3,122
2,973
887
676
418
109
0
0
0
0
0
0
0
0
0
0
0
0
0
3,082
2,773
2,912
3,058
2,905
3,021
3,142
3,268
18,447
19,121
19,438
14,928
15,435
15,901
13,170
13,450
13,702
13,924
36
Preferred stock (redeemable)
0
0
0
0
0
0
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
0
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Total Liabilities
0
1,547
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Total common shares (diluted)
Total preferred shares outstanding
AFN (interactive with 3 items below)
Adjustment to LT Debt (iterate or use Goal Seek)
Issue Common Stock to Fund AFN
Set Balance Sheet Cash Lower to Fund AFN
220
2,828
23,627
(10,566)
0
(2,790)
13,319
31,766
2,007
0
0.0
155.7
220
2,828
24,859
(10,566)
0
(2,790)
14,551
33,672
2,014
0
0.0
(28.5)
220
2,828
26,226
(10,566)
0
(2,790)
15,918
35,356
2,020
0
0.0
(304.0)
220
2,828
27,200
(10,566)
0
(2,790)
16,892
31,820
2,026
0
0.0
(3,206.7)
220
2,828
28,284
(10,566)
0
(2,790)
17,976
33,411
2,033
0
0.0
(79.6)
220
2,828
29,489
(10,566)
0
(2,790)
19,181
35,082
2,039
0
0.0
(149.3)
220
2,828
30,466
(10,566)
0
(2,790)
20,158
33,328
2,046
0
0.0
(2,085.1)
220
2,828
31,519
(10,566)
0
(2,790)
21,211
34,661
2,052
0
0.0
(211.1)
220
2,828
32,653
(10,566)
0
(2,790)
22,345
36,047
2,058
0
0.0
(258.2)
0
220
2,828
33,873
(10,566)
0
(2,790)
23,565
37,489
2,065
0
0.0
(309.6)
BMY Technical Appendix, Page 5 of 8
BA
1
Enter Firm Ticker
2
3
BB
BMY
BC
BD
BE
BF
BG
BH
BI
BJ
2005
2006
2007
2008
2009E
2010E
2011E
values in millions
Historical Ratios and Valuation Model
2004
4
BK
BL
BM
BN
BO
BP
2016E
2017E
2018E
Forecasted Ratios and Valuation Model -- 10 Years
2012E
2013E
2014E
2015E
5 Liquidity
6
Current
7
Quick
1.32
1.48
1.27
0.95
1.94
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
1.35
8
Net Working Capital to Total Assets
0.16
0.19
0.15
0.07
0.27
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
1.50
1.78
1.59
1.20
2.20
1.61
1.61
1.61
1.61
1.61
1.61
1.61
1.61
1.61
1.61
9 Asset Management
10
Days Sales Outstanding
82.36
66.27
73.12
80.13
65.75
73.53
73.53
73.53
73.53
73.53
73.53
73.53
73.53
73.53
73.53
11
Inventory Turnover
10.59
9.03
7.80
8.41
11.67
9.29
9.29
9.29
9.29
9.29
9.29
9.29
9.29
9.29
9.29
12
Fixed Assets Turnover
3.36
3.27
2.86
3.22
3.81
3.70
3.70
3.70
3.70
3.70
3.70
3.70
3.70
3.70
3.70
13
Total Assets Turnover
0.64
0.66
0.63
0.70
0.70
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.5%
14 Debt Management
15
Long-Term Debt to Equity
83.0%
74.6%
72.5%
41.5%
53.8%
50.6%
46.1%
40.3%
19.0%
17.4%
15.5%
4.4%
3.2%
1.9%
16
Total Debt to Total Assets
34.0%
30.5%
29.1%
24.2%
22.8%
24.4%
23.1%
21.3%
13.2%
12.5%
11.6%
5.8%
5.1%
4.3%
17
Times Interest Earned
N/A
N/A
N/A
N/A
N/A
11.1
11.7
12.8
21.2
22.5
24.3
53.3
62.4
77.1
3.5%
103.9
18 Profitability
19
Gross Profit Margin
69.1%
69.2%
66.6%
67.7%
68.9%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%
20
Operating Profit Margin
22.8%
23.1%
12.9%
17.5%
26.6%
19.1%
19.1%
19.1%
19.1%
19.1%
19.1%
19.1%
19.1%
19.1%
19.1%
21
Net After-Tax Profit Margin
15.0%
18.5%
10.2%
13.8%
20.2%
13.2%
13.3%
13.4%
13.8%
13.9%
13.9%
14.2%
14.3%
14.3%
14.4%
22
Total Assets Turnover
0.64
0.66
0.63
0.70
0.70
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
0.68
23
Return on Assets
7.8%
10.7%
6.2%
8.4%
17.8%
11.4%
11.4%
11.5%
11.8%
11.8%
11.9%
12.1%
12.1%
12.1%
12.2%
24
25
Equity Multiplier
Return on Equity
2.98
23.4%
2.51
26.8%
2.56
15.9%
2.45
20.5%
2.41
42.9%
2.39
27.1%
2.31
26.4%
2.22
25.5%
1.88
22.2%
1.86
22.0%
1.83
21.7%
1.65
20.0%
1.63
19.8%
1.61
19.6%
1.59
19.4%
26
27
EPS (using diluted shares, excluding extraordinary items)
1.20
1.43
0.62
0.88
1.58
1.82
1.93
2.03
1.87
1.96
2.05
1.98
2.05
2.13
2.21
28
DPS (dividends per share)
1.10
1.10
1.12
1.15
1.23
1.28
1.31
1.35
1.38
1.42
1.46
1.50
1.54
1.58
1.62
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions)
2004
2005
2006
2007
NOPAT (net operating profit after tax)
2,899
3,434
1,654
2,504
ROIC (return on invested capital)
31.2%
39.3%
20.4%
30.4%
EVA (economic value added)
2,091
2,675
948
1,787
FCF (free cash flow)
N/A
3,990
2,271
2,373
Weighted Average Cost of Capital
Net Operating Working Capital (NOWC)
3,523
3,039
2,442
2,596
Operating Long Term Assets
5,765
5,693
5,673
5,650
Total Operating Capital
9,288
8,732
8,115
8,246
Valuation (in millions where appropriate) -- through year 2018E
Long-term Horizon Value Growth Rate (user-supplied)
PV of Forecasted FCF, discounted at 8.70%
Value of Non-Operating Assets
Total Intrinsic Value of the Firm
Intrinsic Market Value of the Equity
Per Share Intrinsic Value of the Firm
MVA (market value added)
Weighted Average Cost of Capital Calculations
Item
Value
Percent
ST Debt (from most recent balance sheet)
154
0.30%
LT Debt (from most recent balance sheet)
6,585
12.96%
MV Equity (look up stock's mkt. cap and enter in cell BB53)
44,060
86.73%
Weighted Average Cost of Capital
Cost Weighted Cost
3.50%
0.01%
5.00%
0.49%
9.45%
8.20%
8.70%
2008
4,151
30.7%
2,973
(1,144)
8.7%
8,136
5,405
13,541
2009E
3,135
30.4%
2,238
6,366
8.7%
4,470
5,839
10,310
2010E
3,323
30.4%
2,373
2,704
8.7%
4,738
6,190
10,928
2011E
3,489
30.4%
2,491
2,943
8.7%
4,975
6,499
11,474
Forecasted Valuation Metrics -- 10 Years
2012E
2013E
2014E
2015E
3,140
3,297
3,462
3,289
30.4%
30.4%
30.4%
30.4%
2,242
2,354
2,472
2,348
4,288
2,781
2,920
3,858
8.7%
8.7%
8.7%
8.7%
4,478
4,702
4,937
4,690
5,849
6,142
6,449
6,126
10,327
10,843
11,386
10,816
2016E
3,420
30.4%
2,442
2,988
8.7%
4,878
6,371
11,249
2017E
3,557
30.4%
2,540
3,107
8.7%
5,073
6,626
11,699
2018E
3,700
30.4%
2,641
3,232
8.7%
5,276
6,891
12,167
2008
3.50%
$51,629
$8,265
$59,894
$53,155
$26.56
$40,914
2009E
2010E
2011E
2012E
2016E
2017E
2018E
$49,753
$51,375
$6,352
$6,733
$56,104
$58,108
$48,358
$50,329
$24.38
$25.26
$35,039
$35,779
Capital Asset Pricing
Risk Free Rate
Beta
Market Risk Prem.
Cost of Equity
$52,900
$7,070
$59,969
$52,442
$26.21
$36,524
Model
4.25%
0.80
6.50%
9.45%
$53,212
$6,363
$59,575
$55,366
$27.55
$38,474
2013E
$55,059
$6,681
$61,740
$57,560
$28.51
$39,584
2014E
$56,927
$7,015
$63,942
$59,858
$29.52
$40,678
2015E
$58,019
$6,664
$64,683
$62,741
$30.80
$42,583
$60,077
$6,931
$67,007
$65,234
$31.88
$44,023
$62,194
$7,208
$69,402
$67,842
$33.01
$45,497
$64,370
$7,496
$71,867
$70,571
$34.18
$47,006
BMY Technical Appendix, Page 6 of 8
BQ
BR
BS
BT
BU
BV
BW
BX
BY
BZ
CA
CB
CC
CD
CE
CF
CG
1
2
3
4
5
6
7
8
9
In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.
2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.
3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.
4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values. 10
11
12
13
Inputs
14
Per share value (hist. & DCF est.)
15
Market capitalization
16
EBITDA
17
18
19
Enterprise Value
Multiples
Price/Sales
2004
$18.37
$35,675
$3,907
$42,341
Historical
2005
$17.37
$33,906
$3,870
$39,451
Ratios and Valuation
2006
$21.26
$41,670
$2,016
$47,087
2007
$26.47
$52,146
$2,847
$56,617
2.87
2.13
2.24
2.20
2.18
2.56
2.53
2.51
2.77
2.77
2.77
2.77
6.70
9.89
9.71
9.64
11.31
11.19
11.09
12.23
12.23
12.23
12.23
18.27
21.86
-38.30
7.61
18.64
17.85
12.93
20.73
20.53
16.28
21.86
21.86
21.87
23.36
19.89
6.51
10.62
10.36
10.17
11.31
11.15
10.99
11.76
11.71
11.66
11.60
14.11
13.38
13.08
12.90
14.74
14.56
14.39
15.58
15.54
15.50
15.47
-2.6%
5.53%
13.2%
5.25%
5.4%
5.20%
5.6%
5.14%
7.7%
5.02%
4.8%
4.98%
4.9%
4.94%
6.1%
4.86%
4.6%
4.82%
4.6%
4.78%
4.6%
4.74%
2009E
$24.50
$31.34
$8.25
$34.90
$38.57
$8.25
$38.57
$24.38
2010E
$25.86
$33.08
$3.49
$36.83
$40.88
$3.49
$40.88
$25.26
2017E
$26.83
$34.32
$3.89
$38.21
$45.06
$3.89
$45.06
$33.01
2018E
$27.78
$35.53
$4.02
$39.56
$46.78
$4.02
$46.78
$34.18
N/A
8.45
10.19
23
Price/Earnings
15.26
12.12
34.38
30.10
24
25
Free Cash Flow Yield
Dividend Yield
5.99%
11.6%
6.35%
5.4%
5.28%
4.5%
4.34%
26
Valuation Estimates Based On:
Price/Free Cash Flow
Enterprise Value/EBITDA
32
Price/Earnings
Historical
Override
Average
2.25
12.71
2.57
14.16
21.19
w/Manual
33
Low Price
34
High Price
35
DCF Price
Forecasted Stock Prices Based on Historical Multiples -- 10 Years
2011E
$27.03
$34.57
$3.78
$38.49
$42.99
$3.78
$42.99
$26.21
2012E
$24.22
$30.98
$5.48
$34.49
$39.54
$5.48
$39.54
$27.55
2013E
$25.32
$32.38
$3.54
$36.05
$41.43
$3.54
$41.43
$28.51
2014E
$26.46
$33.85
$3.70
$37.69
$43.43
$3.70
$43.43
$29.52
2015E
$25.03
$32.01
$4.87
$35.64
$41.84
$4.87
$41.84
$30.80
2016E
$25.91
$33.15
$3.75
$36.90
$43.41
$3.75
$43.41
$31.88
36
37
Forecasted Per Share Stock Values
Price/Sales and Enterprise Value/EBITDA vs. Price
$40
$35
20
$30
$25
15
$20
10
$15
$10
5
$5
$0
0
Price/Sales
Enterprise Value/EBITDA
Historical or DCF Price
Forecasted Value Per Share
25
Historical or DCF Price
P/S and Ent. Value/EBITDA
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
2018E
$34.18
$70,664
$5,777
$67,036
18.32
10.84
31
2017E
$33.01
$67,932
$5,555
$64,757
2.57
Enterprise Value/EBITDA
Price/EBITDA
2016E
$31.88
$65,320
$5,341
$62,541
20.67
Price/Free Cash Flow
30
Forecasted Ratios and Valuation
2012E
2013E
2014E
2015E
$27.55
$28.51
$29.52
$30.80
$55,439
$57,636
$59,938 $62,824
$4,904
$5,149
$5,406
$5,136
$55,469
$57,428
$59,413 $60,389
1.82
22
29
2011E
$26.21
$52,511
$5,448
$55,395
8.76
21
Price/Sales
2010E
$25.26
$50,396
$5,189
$53,752
1.84
Price/EBITDA
28
2009E
$24.38
$48,422
$4,895
$51,996
9.13
20
27
2008
$22.24
$43,968
$6,567
$42,731
$50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Low Price
DCF Price
High Price
CH
BMY Technical Appendix, Page 7 of 8
CI
CJ
CK
CL
CM
CN
CO
CP
CQ
CR
CS
CT
CU
CV
CW
CX
CY
CZ
DA
1
2
3
Price/Earnings Ratio and Dividend Yield
7
8
9
10
11
12
13
7.0%
30
6.0%
25
5.0%
20
4.0%
15
3.0%
10
2.0%
5
1.0%
0
0.0%
$2.50 EPS and DPS
6
Earnings and Dividends Per Share
35
Dividend Yield
5
Price/Earnings Ratio
4
$2.00 $1.50 $1.00 $0.50 $0.00 14
15
16
Price/Earnings Ratio
17
Dividend Yield
Earnings Per Share
Dividends Per Share
18
19
Gross, Operating and Net Profit Margins
20
22
24
25
26
27
28
Gross Margin
23
29
30
Return on Assets, Equity and Invested Capital
80%
70%
60%
50%
40%
30%
20%
10%
0%
ROA, ROE and ROIC
21
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
31
32
33
Gross Margin
34
Operating Margin
Net Margin
Return on Assets
Return on Equity
Return on Invested Capital
35
36
37
NOPAT and Free Cash Flow (millions)
$3,000 $2,500 $2,000 $1,500 $1,000 Economic Value Added
Market Value Added
NOPAT and Free Cash Flow
$48,000 $46,000 $44,000 $42,000 $40,000 $38,000 $36,000 $34,000 $32,000 $30,000 Market Value Added
Economic Value Added & Market Value Added (millions)
$3,500 Economic Value Added
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
$4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 NOPAT
Free Cash Flow
DB
BMY Technical Appendix, Page 8 of 8
DC
DD
DE
DF
DG
DH
DI
DJ
DK
DL
DM
DN
DO
DP
DQ
DR
DS
DT
DU
1
2
3
6
7
8
9
10
11
12
13
25,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
Avg. Daily Volume 5
Average Daily Trading Volume (thousands)
Short Interest (thousands of shares)
Short Interst (thousands)
4
20,000
15,000
10,000
5,000
14
0
15
16
Average Daily Volume (thousands of shares)
Short Interest (thousands of shares)
17
18
19
Days to Cover Ratio (Short Interest / Volume)
20
21
7.0
23
24
25
26
27
28
29
Days to Cover Ratio
22
30
Peer Comparison: Price/Cash Flow Ratio
30
6.0
25
5.0
20
4.0
15
3.0
2.0
10
1.0
5
0.0
0
31
32
33
34
Days to Cover
BMY
AZN
TEVA
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Net Insider Purchases (Sales) , $, in thousands
Peer Comparison: Price/Earnings Ratio
30
$8,000 $7,000 25
$6,000 $5,000 20
$4,000 15
$3,000 $2,000 10
$1,000 5
$0 BMY
AZN
TEVA
Insider Transactions
DV