Research Update: Bristol-Myers Squibb Co. Downgraded To 'A' On Plans For $21 Billion Of Debt-Financed Acquisitions; Outlook Stable

In recent days Pharmaceutical maker Bristol-Myers Squibb Co. (BMY) announced the acquisition of Karuna Therapeutics (not rated) for $12.7 billion and RayzeBio (not rated) for $3.6 billion, (both net of cash at target) to be funded with debt. This follows on the heels of the acquisition of Mirati ($3.7 billion, plus a $1 billion contingent value right; not rated) announced in October 2023 Collectively, these acquisitions add about 1x of debt leverage, relative to trailing leverage of about 1.7x as of September 2023. In addition, we expect the investments needed to advance and optimize the acquired assets for the next couple of years to weigh on EBITDA margins and cash flows available for debt reduction. Given the company's public comments,

...- In recent days Pharmaceutical maker Bristol-Myers Squibb Co. (BMY) announced the acquisition of Karuna Therapeutics (not rated) for $12.7 billion and RayzeBio (not rated) for $3.6 billion, (both net of cash at target) to be funded with debt. This follows on the heels of the acquisition of Mirati ($3.7 billion, plus a $1 billion contingent value right; not rated) announced in October 2023 - Collectively, these acquisitions add about 1x of debt leverage, relative to trailing leverage of about 1.7x as of September 2023. In addition, we expect the investments needed to advance and optimize the acquired assets for the next couple of years to weigh on EBITDA margins and cash flows available for debt reduction. - Given the company's public comments, we expect management to balance debt reduction with other competing priorities including at least a modest level of mergers and acquisitions (M&A), share repurchases to offset dilution, and continued dividend growth. We therefore expect leverage...

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