Financial Analysis of Bristol-Myers Squibb

Financial Analysis of Bristol-Myers Squibb

Description of Bristol-Myers Squibb

Bristol-Myers Squibb Company (BMS), incorporated in August 1933, is a global BioPharma company engaging in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products all over the world (Andreotti, 2012). It develops and produces a variety of medicines from chemically-synthesized drugs to small molecules to biologics, like Abilify, Atripla, Avalide, Avapro, Azactam, Baraclude, Bicnu, Buspar, Ceenu and Coumadin, etc. which cover various diseases such as diabetes, oncology, cardiovascular, neuroscience, virology and immunology (Products, 2012). The continuous innovations and focusing on customers' needs make Bristol-Myers Squibb Company be the most productive pharmaceutical company. Bristol-Myers Squibb Company possesses many medicine patents all over the world. Since 2002, Bristol-Myers Squibb has delivered 13 new medicines to patients with cancer, HIV/AIDS, psychiatric disorders, rheumatoid arthritis, diabetes and so forth (Andreotti, 2012). The medicines of Bristol-Myers Squibb are popular all over the world and the sales are up to billions annually. Therefore, it is undeniable that Bristol-Myers Squibb is a BioPharma leader.

History of Bristol-Myers Squibb

Bristol-Myers Squibb has over one hundred years' history. In 1887, William McLaren Bristol and Ripley Myers invested $5,000 in a pharmaceutical company in Clinton, New York (History, 2012). For the first few years, the company only focused on producing medicines and encountered financial problems like the insufficient capital. In 1898, the company's name was changed from Clinton to Bristol, Myers' company (History, 2012). After shifting focus on wholesale and retail druggists, it experienced a growth and then was recognized as primary suppliers of medication. In about 1903, it produced Ipana toothpaste, which presented Bristol and Myers entered the consumer products market; later, Bristol-Myers expanded from a regional company into an international one (History, 2012). After one century's development, Bristol-Myers continued to grow and its products became more diverse ranging from pharmaceuticals to consumer products to medical devices to nutritional products. After entering the 21st century, Bristol-Myers continues its global expansion and more and more its popular medicines are invented and introduced into international market, which bring billions dollars revenue per year for Bristol-Myers. Nowadays, by possessing numbers of medicine patents and continuing product innovations, Bristol-Myers keeps its leadership in the global pharmaceutical industry.

Industry Analysis

The Limitation and Boundaries

Since Bristol-Myers Squibb involves the pharmaceutical field and the healthcare field, and these two fields are always analyzed together as one industry, this study also would integrate pharmaceutical industry and healthcare industry into one industry for the industry analysis. Moreover, as Bristol-Myers Squibb is an international corporation and its significant number of sales comes from oversea markets, the industry analysis also covers the global market. But the America market would still be the main focus because over half of its income is from America market.

Research and Development in Pharmaceutical Industry

The main cost of pharmaceutical mainly depends on the cost of research and development in new drugs, and the investment in research and development of new drugs determines whether the pharmaceutical companies can make profits by selling new drugs and gain the advantage in marketplace. Therefore, analyzing the current situation and trend of research and development in the entire pharmaceutical industry is critical for Bristol-Myers Squibb.

The Role of Federal Research and Development. The federal government annually appropriations over hundred billion dollars for research and development of medicines that mainly focuses on the mechanisms of disease, which underpins the pharmaceutical industry's search for new drugs. In 2007, the federal government spent $137 billion on R&D activities and gave tax benefits to pharmaceutical companies to increase their R&D spending (The Congress of the United States, 2007). Moreover, the federal funds mainly focus on the research especially the basic research, which is favorable for the pharmaceutical companies because they can more easily develop new drugs based on existing research findings supported by federal funds. Since the early 1980s, federal spending for research has grown more steadily and more quickly than that for development that only occupies only 17 percent of the total federal funds (The Congress of the United States, 2007). Recent years, although the total federal funds for pharmaceutical research and development slowed its pace of growth, it still grows steadily. In 2010, federal funds on health research rose 1.2% from $138.9 billion to $140.5 billion (Research America, 2010). Also, the favorable tax for pharmaceutical companies will continue.

Spending by Industry for Research and Development. Comparing with the growth of federal spending on pharmaceutical research and development, spending by industry for research and development has grown faster. In 2011, PhRMA Member Companies invested $49.5 billion in research and development, which was the single largest share of all United States business research and development representing nearly 20 percent of all domestic research and development expense (PhRMA, 2012). There is no doubt that the pharmaceutical industry is the most research-intensive industry. Lots of pharmaceutical companies spend most of their capitals in research and development. In other words, the main cost for pharmaceutical companies is the spending in R&D. Especially, as main pharmaceutical companies constantly increase their spending in R&D, other pharmaceutical companies have to keep their spending in R&D up to keep advantage in the marketplace or to invent more effective or new drugs to occupy the market and make profits. The globally largest pharmaceutical corporations--Johnson & Johnson spent $6,986 million on R&D in 2009 (Johnson & Johnson Annual Report, 2010). At the same time, the second largest pharmaceutical corporations--Pfizer even spent more money in R&D, rising up to $7,845 million (Pfizer Financial Report, 2010). In 2011, Pfizer's expenses in connection with R&D grow up to $9,112 million (Pfizer Financial Report, 2011). Also, according to Bristol-Myers Squibb's 10-K annual report (2012), Bristol-Myers Squib spent $3,839 million on R&D in 2011. The competition in