Bristol Myers Squibb ‘s earnings beat and rosy outlook Thursday did not resolve lingering issues for the stock. But it was enough, for now. Revenue in the first quarter, which ended March 31, dipped 6% to $11.2 billion but topped estimates of $10.7 billion, according to LSEG. Adjusted earnings per share of $1.80 beat expectations of $1.49. During last year’s Q1, the company reported a loss. BMY YTD mountain Bristol Myers’ year-to-date stock performance. While mostly lower Thursday above $48 each, shares of Bristol Myers have lost around 20% in April on tariff uncertainty and some disappointing news around its pipeline. We’re keeping our hold-equivalent 2 rating — instituted back in March when we took profits at roughly $62 a share — while lowering our price target to $60 from $70. Bottom line Bristol Myers has a tougher road ahead to prove that it can power through looming generic competition for some of its older drugs. And, this week’s failed trial for new schizophrenia treatment Cobenfy is why. It raises the bar for execution on Cobenfy for both patient uptake for the currently approved condition and future clinical trial readouts for new uses of the drug, such as Alzheimer’s disease psychosis. Bristol Myers’ first-quarter results Thursday were solid on their face, as sales, earnings and gross margins all topped expectations. But digging deeper into the numbers, it was strength in two of the company’s older drugs — blood thinner Eliquis and blood cancer therapy Revlimid — that fueled a good chunk of the topline sales beat. That helps explain the subdued market reaction to the quarter, and a similar dynamic is at play with Bristol Myers’ raised full-year sales and earnings guidance. Is it frustrating that weaker Revlimid numbers hurt the stock the last time it reported earnings, and now the drug’s better-than-expected results are being shrugged off? Yes. But the disappointing Cobenfy trial — on top of a recent failed study to expand the use of heart drug Camzyos, to say nothing of tariff uncertainties crimping sentiment — has understandably created a less forgiving backdrop. Bristol Myers Squibb Why we own it: The company’s new schizophrenia treatment Cobenfy has major sales potential, though it remains in the early innings. Bristol Myers has key products, such as blood-clot prevention drug Eliquis and lung-cancer therapy Opdivo, which will be coming off patent in the coming years. However, we believe its portfolio of growth drugs including Cobenfy can help navigate that patent cliff. Initiation: Nov. 25, 2024 Most recent buy date: Feb. 10, 2025 Competitors: AbbVie , Pfizer , Amgen , Johnson & Johnson and Merck As Jim Cramer explained on Thursday’s Morning Meeting, we have not lost total confidence in Bristol Myers’ ability to execute, which is why we’re staying invested. At current prices, the stock’s dividend yield of 5% is also attractive, and the valuation, at less than 8 times forward earnings, is not demanding. Nevertheless, the path to victory and meaningful stock gains has gotten tougher. Commentary Investors on Thursday were laser-focused on Cobenfy — the crux of the Club’s stock thesis — after the new schizophrenia drug failed to meet expectations in a trial examining its efficacy as an add-on therapy for the disorder. That put pressure on the stock in Wednesday’s session, missing out on a broad rally across the market. Cobenfy is key to Bristol Myers’ plan to navigate patent expirations for several “legacy” drugs, such as the aforementioned Eliquis and Revlimid. Cobenfy received approval from U.S. regulators as a standalone schizophrenia treatment in September 2024, six months after Bristol Myers closed its $14 billion purchase of Karuna Therapeutics, which brought Cobenfy on board. Cobenfy sales in the first quarter totaled $27 million, ahead of the $17 million expected by analysts, according to FactSet. However, the reported figure includes a $9 million “gross-to-net” benefit associated with discounts and rebates, making the beat versus expectations less substantial. CEO Chris Boerner said Bristol Myers is pleased with the early prescription trends for Cobenfy. “Patient and physician feedback is very positive,” he said, adding that “patients are observing cognitive benefits.” Boerner and other executives on the call maintained a positive view on Cobenfy’s future despite the add-on trial setback. The company continues to focus on Cobenfy as a standalone treatment, which represents 70% to 80% of the market, Boerner said. The goal is for Cobenfy to be the “foundational treatment” there, he said. Adam Lenkowsky, the company’s chief commercialization officer, offered a deeper explanation of why the add-on treatment opportunity was secondary in their plans. He said that psychiatrists ideally want to give their patients just one drug. However, he said the reason they start to consider add-on therapies is because a standalone treatment isn’t effective enough on its own. Bristol Myers wants to move Cobenfy up in the treatment line so doctors consider prescribing it sooner, Lenkowsky said. In another sign of confidence in the drug, Boerner said Bristol Myers expects to commence by midyear three additional late-stage trials examining Cobenfy’s ability to treat other conditions: (1) Alzheimer’s disease agitation, (2) Alzheimer’s cognition impairment, and (3) Bipolar I. A readout on a late-stage trial of Cobenfy to treat Alzheimer’s psychosis is expected later this year. Executives said the setback in add-on schizophrenia does not change their expectations for the other trials. Guidance Bristol Myers raised its 2025 guidance on a few key metrics, but the reasons for the revisions — including foreign-exchange benefits — explain why the company is not getting a lot of credit. Bristol Myers’ sales outlook is now $45.8 billion to $46.8 billion, up from $45.5 billion previously. That reflects a $500 million benefit from foreign exchange rates. The company also expects better-than-expected revenue from its “legacy” portfolio of drugs in the first quarter and what the company called strong performance in its more important “growth” portfolio. In the first quarter, the growth portfolio saw an 18% increase in revenues and represented about half of total sales. On the earnings call, executives said legacy portfolio revenue is expected to decline between 16% to 18% this year, a more modest decline than expected, due primarily to Revlimid’s performance. Bristol Myers maintained its full-year operating margin target of 37%. New adjusted EPS guidance of $6.70 to $7 was up by 15 cents on both ends of the range. The company is also factoring in $70 million more in royalty and interest income than previously expected. Additionally, the guidance accounts for existing tariffs on U.S. products imported into China, but not the pharmaceutical-specific tariffs threatened by the Trump administration. Unsurprisingly, executives were peppered with questions about tariffs on the earnings call, and their overarching message was basically that the company has a lot of flexibility within its manufacturing network to respond, and they are looking for ways to optimize it with tariffs in mind. Bristol Myers has a significant presence in the U.S., but is not overly reliant on any one country for its supply chain, executives explained. “We’re also going to continue to engage with the administration to ensure that, ultimately, whatever comes down, is well-thought through and deliberate in terms of how we how we move forward,” Boerner said. A final thing to highlight from the call was the discussion about business development, often shortened to just “BD” by executives. This includes potential acquisitions or partnerships on drugs, representing another level to pull to offset patent expirations. Boerner said Bristol Myers is “actively pursuing opportunities” that can boost the company’s growth profile. “With our renewed organizational agility and balance sheet in a solid position, we have the flexibility to act decisively when we find the right opportunities,” he said. (Jim Cramer’s Charitable Trust is long BMY. See here for a full list of the stocks.) 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Bristol Myers Squibb‘s earnings beat and rosy outlook Thursday did not resolve lingering issues for the stock. But it was enough, for now.