$BMY deep dive

hi everyone we're going to do a single stock today uh Bristol Meers one of my old favorites one of the first companies I ever looked at actually so let's get to it I'm going to get a Red Bull too I need the bull for for this can you guys hear me okay maybe it's a little quiet what's up what's up what's up let me get that Red Bull and I'll be right back we're going to look at a company called Bristol Meers big company big Pharma quintessential big Pharma great company legendary Happ BRB a great financial analyst the definition is an entity that turns coffee and Red Bull into profits this uh old math joke that a math professor is someone who turns coffee into theorems all right so the way I look at drug companies and what's really nice about them compared to other kinds of companies is that you basically just have to look at each drug there's not actually a lot more to most of these companies um than just looking at every single drug um if you look at every drug you basically will get a sense for um see if I can get the mic a little bit better you'll basically get a sense for how maybe that's better you'll get a sense for um the value by just looking at the portfolio there isn't a whole lot more to it than that management skill is very important but ultimately the most important thing is what what are the drugs worth where are they going things like that again let me try to get a better volume for you guys I'm not a I'm not a Mac User it's sometimes pretty pretty frustrating but uh maybe I'll just speak up a little bit I'm not worried about monkey pox no um so we're just here to talk about one stock I'm going to like make this video and save it so you guys know how to look at a drug company in in really in-depth detail uh I also wanted to let let the world know I'm streaming on my Twitter or my X account Bristol Meyers in the late 90s I think a lot of big Pharma that was like the big Pharma Heyday there was also a drug they had called herbox that a lot of people were excited about people thought it' be like a cancer cure it didn't end up being cancer cure okay I just sent the Tweet out so there should be some more people here in a second so Bristol has a long history really amazing company like I said responsible for a lot of breakthroughs over the decades but the funny thing about the drug business is you have to constantly reinvent yourself because your drugs go generic and um that makes it very hard to build a business for the long run that actually has Brands and things like that um it's rather just you know frustrating building a drug company because there's a life cycle to every drug and that life cycle means that all of these drugs will one day sort of come and go and when we look at the model which you can just sort of put together through the 10 Q their biggest drug right now is called elois um it's a blood thinner sometimes called A pixan and A pixan is a great drug but it's going to go generic soon and that means that there'll be no profit left once it goes generic there we go want to double check some of these numbers but um the next biggest drug is called obdo um obdo is a great cancer drug but again at some point there'll be a biosimilar pills go generic and when a pill is generic it means that any company can make it and make make it for rock bottom prices so generally Pharma companies lose 90 95 maybe even 99% of their revenue from that drug when the generic drugs hit um in biological drugs which are not pills but they're antibodies and they look very different in fact let's take a look at exactly what I'm talking about I'm going to show you the molecular structure of a pixan and here it is it's a pisalo paradine I think perimidine or paradine always get those two confused you can see it's physiochemical properties this is a website called Pub Kem not a lot of people use pbcm but it's kind of cool cool little website um and like I said it's used for blood thinner sort of a was a better Warr uh pisalo Pine so there's the pazol and the Pine's here this is a heterocyclic ring and um Crystal Meers did this drug I want to say by themselves or no they do it with fiser they s it with fiser that's right um and I think it was a Bristol drug invented and then fiser sold so anyway this drug is very easy to make um in fact you can give this to a chemist and a good chemist can say okay I can make this in four synthetic steps or whatever it is and I need a paradine I need a carboxamide I might need a pip paradine and I'm going to do these substitution reactions and eventually I'm going to get this drug and with a really good chemist you want to minimize those steps but the point is it's going to be really cheap and anyone can sell it you have to spend about $2 million to be able to sell it you have to do a human study that shows that the blood levels of your apixaban is the same as the blood levels of the real apixaban but once you satisfy that you're basically good to go um and you even have things like here's the MPC trace and um you know it's very easy to see the peak Peak levels there and um you know it really isn't hard you even have vendors here where you can buy the raw material and then do your own trial and see if you can get a pixa band sold um and you might make money and that's how small drug companies generally start they start making generics but a PIX band will go generic and it will no longer really be a Bristol Myers's drug the revenue will drop from several billion a quarter which is enormous to um some very low number maybe 10 or 20 or 30 million a quarter so that's just something to keep in mind and timing for that patent Cliff is what we usually call them is something we have to think about and look at very carefully drugs like ABDO this is a drug called noolab if I want to show you the chemical structure it's going to look very very very different and the reason is it's a very large molecule this is kind of what it looks like this massive massive molecule so if you were to think about the drug I just showed you a pixan fitting in N volum AB it might be just right here just this little tiny piece so by comparison it really is a gigantic amount of molecules and there's no way to fully um and this is just the Fab fragment the entire uh molecule is even bigger I was wondering is this a single chain I didn't think it was a single chain but the the Fab fragment is just one piece of it the entire antibody looks like this and you could see the Fab fragment here but there's also this constant this is FC is fragment constant and this this constant region is is very large as well so you basically have this huge humongous drug maybe 100 times bigger than a small molecule and there's no real way to do mass spec on that and understand that it's exactly the same so what we have is something that's evolved for 25 years called the biosimilar framework and biosimilars are a lot like generics so they also will tank your sales here's another drug um from Bristol Myers called revid and this used to be one of the biggest drugs in the world when it it was part of a company called celene a very legendary biotech company that merged with Bristol Meers and uh cell's drug revt is going off patent and so revenue is declining very rapidly for revid but it's a very unique drug so it's not going to fall off a cliff the same way I described earlier pist is a lot like revid it's almost the same drug in fact I can show you the structures differ by very little urvoy is a antibody so it has a bit of a different XBR profile so I'm just ordering these by Revenue Vue because at the end of the day what are we trying to do here we're trying to analyze every single medicine and understand where's the revenue and earnings for Bristol Meer is going to come from well we might as well start with the biggest drugs and work our way down and then we can also start with the pipeline which are drugs that are not yet approved but will be and see if any of those are going to be big sellers so reol is a really interesting drug um soep that um is it soep do I have that right I don't think it's so TP actually it's uh from the same company that makes soep but it's a loose PP and loose PP is uh is a really interesting fusion protein and it's unlike it's a new drug so it's very unlikely to go generic anytime soon it's probably going to be one of Bristol's biggest drugs in the long run and it was from a company that I used to own some shares of called acceleron which was an amazing company and acceleron was bought out by MC for so intercept their other drug they should have stayed independent I think they would have done better for everyone it was going to be a monster company they could have sold all the medicine themselves they didn't even need Bristol or Merc but it's not always easy staying independent all right so there's a bunch of other exciting drugs from Bristol Meers like a lot of drug companies they're facing XPR for their um bigger drugs and then eventually the smaller drugs are going to try to kind of compensate for that but every drug has its life cycle it's kind of like the circle of life um you really um just have to understand that uh when you're investing in these companies or trying to understand these companies all right so let's start with elquist um we have the quarterly sales um let's actually go to godell terminal which is uh arrival to Bloomberg and will hopefully be better and cheaper than Bloomberg over time and uh we'll open up the latest 10q which the SEC website has kind of gotten become a [ __ ] show so I'm really happy godell lets me pull up company filings really quickly because that's one of the biggest jobs of a financial analyst um so just going to look at all this uh revenue and stuff like that I just want to make sure my numbers are right I'm going to go to the section that says eloquest and elquist yeah 3416 so it's really really big drug right 3.4 billion a quarter and in fact I have another spreadsheet I want you to see let me just pull that up for you I have a lot of spreadsheets here so I'll do it off off the screen so you don't see my secret spreadsheets where I'm actually part of the Illuminati running the Federal Reserve you don't need to see that that's not for you it's me and Kanye H I'm trying to open the file but this this infernal Mac Excel on a Mac if you ever told me I was can do Excel on a Mac I would say hell no okay found it okay so I have this little and all these files by the way are available on my GitHub so I'm doing this completely for free for you guys um you can thank me later um or hate me either way it's good so I'm going to put down the kind of experience of Bristol Meers because it's really interesting How big elquist got just so you get a sense for how big the these medicines kind of get and I want to say I have another file I probably should do a better job I should do a better job of collecting these but I think this is the only file I have I'll have to check later or I'll check now make you guys wait it only take a second okay maybe this is the only file I have that's just fine so just so you get a sense for like the biggest drugs in the world like kit truda Kuda is selling several billion a quarter um I just was wondering if I had this in annual form because looking at it in quarterly form is a little tedious and so this is basically a database of the largest drugs in the world by quarter and the Eli Lily drug which is their version of AIC is basically on track to be the biggest drug ever by far and even double what OIC ended up becoming so I'm basically stacking the quarters by their first quarter so in the long run some of these drugs started out slow and then ended up really big um these are not correct obviously those might be in Danish croner because Novo Nordisk is a Danish company but I also want to do it for annual just because that's almost like a more meaningful U metric in some ways so maybe I should do that how should I do that I just do that like here and of course this is supposed to be about Bristol Myers but it's also going to tell you about other companies too so in some ways we could just do it like this right okay let's take this and drag it down this should work okay so for a lot of these medicines the biggest even the biggest medicine like OIC 3.7 billion in the full third year is a lot and you can see that um the whole point of this showing you this is that elquist is a big drug it's doing 10 12 13 billion a year huge where did it start well we don't have I think when I either when I had to take my break or something like that I uh didn't um necessarily um keep all my old models so I've had to start a lot more but uh let's see if we can find kind of like this it's not easy to use the new SEC website but I'm starting to get a little bit of the hang of it um let's see here they really designed it some whoever designed it never invested a dollar in their life I can tell you that okay so well it reset the form why would it do that all right all right so we're looking for the 20 2017 revenue for eloquest why are we doing this it's good to be complete you know you don't want to not know not know your stuff even though elquist is probably going to go generic it doesn't take long to pop the numbers in okay so they did 4872 and we can get a couple years at once here 33 43 and uh 18 60 so you can see how sharp the revenue increase was I think they were approved in 2014 but we should have that data somewhere here as well and like I said elois is just a blood thinner um there it is 7913 FDA approval and I'm going to note that in the model seven 7913 FDA approval and you can see this is going to be a long laborious video it's like this is hopefully going to be a definitive guide for many people for many years to come on how this stuff works but anyway it looks like year three was 1860 for elquist so would have been here right and here's elquist and it's fizer and Bristol so I want to make sure that we're actually getting the whole thing because I'm not sure if fizer books revenue for eloquest as well which is important so I'm going to just sort this is a very partial list of drugs by the way in the drug industry but it's going to become a full list if I keep adding to it right so let's sort by what is this column ABC DFG let's try that no not quite all right let's column G all right so elquist at least on this partial list is the fourth had the fourth biggest year three so I just again wanted to want to get you a sense for how just how massive um these drugs are and let's look at year four as well year four elquist did 3343 so they were kind of still number number four and then your five let's see where is your a a so it's a zpic is a little off because of the um Danish croner thing I have to adjust later but you can see here that eloquence would actually be the third biggest according to the year five launch so right now it's like I said it's in the 12 13 billion range so when will this massive win kind of disappear and we're going to look at the patents and see like eventually this Revenue tra trajectory you know you can see that the revenue is kind of slowed down down it went from a small number to 2 billion 3 billion 5 6 8 9 11 12 12 it s slowing down 12 and a half will be this year and then it's going to go off a cliff and I have this Cliff starting probably way too late I think the cliff will come sooner and in fact you can see in this old filing that they estimated that it' be 2026 when this drug would go generic so if that were true this model is way off and I would even have it maybe something like this where it drops from 13 billion to two or three billion and then it drops to half a billion so very rapid sort of Decline and then uh we'll see here now I think they may have gotten a new patent or something like this so we just have to uh look at that really carefully and again this this isn't exciting stuff this is effective stuff you know I could entertain you and talk about hundreds of stocks at once but it's not going to help you this is for people who really want to understand how to do professional investment analysis I'd rather talk to 10 people that are going to end up becoming hedge fund managers or money managers then talk to 50,000 people that look at their 401k or you know something like that um I'm not really interested in entertaining anybody although I'll try to do it here and there my main goal is to teach the next generation of great investors um anyway so if this is a little boring or less exciting than some of the other channels you watch good you know that's uh it's not meant to be easy or fun it can be a little bit fun but it's definitely not meant to be easy and it's satisfying after you do all the hard work and you see the fruits of your labor um I'm just filling the rest of these out while I'm here I might as well take advantage of the information and throw it in there these are new drugs so we know that they didn't have any revenue for them back then brist Myers had a bit of a different portfolio where you can see baraclude was a big drug for them baraclude is long gone generic and is no longer a big medicine for them but at the time it was it was one of the leading drugs for Hepatitis B um AA was also a major medicine for them and that was one of the best HIV drugs and he would often be paired with um different HIV drugs to create great combination drugs um rayaz was another HIV drug so they had a decent HIV portfolio there but that portfolio is all gone generic hence what I'm talking about which is very frustrating as a drug company you spend all the time do all this research you make these beautiful drugs that save people's lives and then the patent monster kind of runs out and it's over which is kind of a just really wild if you think about it okay but that's the business and we you know you have to play by the rules of the business of having biosimilars kind of or bio biologics gives you a little bit better of opportunity to um evade the generic monster and that was I think probably a little inadvertent at the time when but when drug companies realized that you could really do well by just having biologics instead of um generics it's kind of really nice thing um to realize biologics instead of small molecules I should say so so anyway let me get one more year of old Revenue just a completist I'd like to make sure that I have everything only take one minutes oops okay and you can see in the first year elois sold 146 million and then it jumped to 774 and then 1860 3343 4872 Etc until it became the gigantic drug it is today and in fact it was the second biggest drug if you measure it by the full sixth year of sales although asmic probably was probably bigger so it's probably number three so again one of the most prescribed most used drugs in the world maybe not most prescribed but most certainly highest sales so how do we figure out when is this drug going to go generic well there's a lot of ways the first way is you can just ask the company or see what they've been saying and when you see that you can get a really good sense for how for the answer another couple ways to do it is yeah so let's see what they're let's see what they're saying and they're filing so we're just going to open up the 10q and we're going to look for eloquest and it looks like they're still saying 2026 um and they have some details here and we're going to actually make a whole page just for this one drug and let's see if we have it yeah we got it here some of these models are a little old so they don't always work there we go and we're going we're going to make a little section just for the patents this drug ended up becoming a drug called rivaroxaban um okay so it says here that there's a 2026 patent that's a composition or matter pattern that's usually the strongest kind of pattern so we know 2026 is at least locked in but then there's a formulation pattern formulation patterns are usually very weak and they get challenged and they get kind of um turned over so it looks like they have a settlement with some generic companies and then they also upheld the formulation patent so that's kind of interesting so settled with generic companies with some generic companies but litigated successfully and after appeal to the 2026 and 2031 patents so that's that kind of is cloud clouds the picture quite a bit because depending on the terms of the settlement some of these settlements could allow the revenue to drop still by quite a lot so that'll be interesting oh interesting it says here that under the terms of the previously executed settlement agreements the permitted date of launch is April 1st 2028 so that means that 2028 April 1st 2028 is going to be the xir so they did get a couple extra years I did have it right the first time May 28 allow date of launch as per settlement 2031 patent upheld and you can see that we we forecast quite a bit into the future in Tech we forecast quarter to quarter because we don't know what the hell is going to happen but in Pharma we know what's going to happen and you can really look down the road and plan for these patent xpres um and so in this case I think that we're going to have a little bit you know in fact I bet you it's going to start declining there's a lot of other Factor um 10 Inhibitors I it's Factor 10 yeah Factor XA Factor 10A Inhibitors so I wonder if those drugs are kind of what's driving some declines but anyway it's more important to know when the XPR is happening than the exact amount of Revenue it's good to have both but just knowing when the XPR is coming is is half the battle in forecasting these things because the current revenue is going to basically be unchanged from year to year um at least on a relative basis but when the xre comes that's when the revenue kind of gets gets squashed so basically they're saying you know that's that's when you can expect the generic now I still want to know like what's happening with the the business as we speak and I also want to know what their economics are with fiser because I think that's pretty important but if you look at the last quarter elquist grew 7% and before that it grew nine before that it grew seven to so it kind of looks like it's still growing which I have it shrinking so maybe it'll still grow um and I don't know if like warr's been completely displaced or Warr still used or what but it seems like my forecast of it shrinking is probably not fair and I can adjust that for a little bit of growth and we basically build the forecast like this every drug we just go drug by drug and kind of see what we can learn on each each medicine and we can't be super smart in every single medicine it's going to take a lot of research to do that we're going to try but if we get a good sense of what the portfolio is and where things are going to go you know we get we get closer and closer to what where we need to be it looks like elois is already generic in Europe and as you can see most of the revenue is coming from the US so 8.6 out of the 12.2 so what is that I guess I have a calculator here don't I 8. .6 out of 12.2 is 70% so most of the revenues in the US anyway um I'm just going to maybe jot that down um in the eloquest section so that's going to be countries like China and Japan principally but also Europe keep looking for elquist oh I guess the um the UK found the patent invalid so it's basically just kind of over for elquist outside of the US so it says that they jointly develop and commercialize eloquest um it was discovered by Bristol fiser funds 50 to 60% development cost so that's long over profits and losses are shared equally on a global basis except in certain countries where fiser commercializes and pays Bristol Meers okay so we have some details here I see this is very interesting so they book the revenue um which is the end user Revenue not no hold on it's not the end user Revenue it's the let's take a look okay it looks like they're they book revenue for this is basically an account question or I can put in economics Bristol books us Europe and China oh and Japan Japan Australia his Taye profit share it looks like roughly 50% so what's interesting about this is the margins on this product are much lower because they have to pay fizer so even though it's a 12 billion Revenue product it really looks more like a 7 billion doll Revenue product from like an actual gross profit perspective because if you do the math and this is like a really subtle detail but they have six billion in gross profit out of 12 206 in Revenue so that's 50% so gross margins are very low for this drug because of the fiser relationship so I just wanted to get that clear too before we moved on so that's kind of where eloquest is over time you learn from looking at other companies and so forth what the like Rivals are like there's this other drogy doxan and you learn about like well what could come out that replaces the factor 10A Inhibitors I think the factor 10 inhib will be around for decades they're very very good drugs they're much better than warrin which was um a medicine that's uh you know kind of very very old medicine actually comes from University Wisconsin that's Warf is uh Wisconsin alumni Research Foundation so War Forin is was the first drug from that with respect to somebody saying um is he going to do this for every drug this is going to take forever yes that's it's called hard work welcome to reality I'm glad I can introduce you to it if a drug company has 35 drugs you got to look at 35 drugs you can't just look at one and guess on the other 34 maybe that's what you do maybe you have ADHD I don't back to work you're not going to make it in this life you're going to make this world you're going to be getting my coffee if you're lucky that's a good job getting my coffee and there is a lot of benefits from knowing a lot of these medicines because let's say you venture capitalist well you have to know which drugs are big and which aren't and you know what the opportunities are if there's look at the huge opportunity to replace warrin was much bigger than anybody thought um but if you were paying attention you would have seen that when when eloquest came out I thought it would be a$6 billion do drug so that tells you something it ended up being a 12 or 13 billion drug um in fact I hired the person who was the head of commercial for eloquence outside the US um yeah I don't care about how many viewers I have I have a lot of viewers who came through our and watched our videos that are billionaires I'm much more interested in talking to the intelligent viewer than the ADHD adal Zoomer who can't make heads or Tales of their life and wants to watch Aiden Ross go watch Aiden Ross play fortnite I don't give a [ __ ] I'm here to make billions of dollars and you know I don't mind showing you how it's done all right let's go back to the second biggest drug now which is called updo updo is a pd1 inhibitor which is called a checkpoint inhibitor so pd1 um is you know kind of like this breakthrough cancer drug and Kuda is their rival and Kuda is kind of done better a little better than optivo in fact you can look at the sales here Kuda um outsold opdo just in its sixth year and right now kud is doing like 20 billion I want to say which there was never a drug that sold 20 billion until now the co drugs sold like that let's see AK L MN all right and you can see you know actually do now 729 requis so you can see like which ones started to break away if you graph these uh this backwards I hate Excel sometimes um okay there we go a little bit better right no not better FML maybe like this this is why we need AI this is a disaster um well anyway without that you can see that like Kuda started to break away even though it was neck and neck with some of these other drugs these four it really started to break away in year five and six and seven to the point where it was twice as big let's look at obdo which had a similar story so when did updo get approval and remember this is a biologic it looks like 1222 14 so right at the end of 14 I remember when this approval came out and I remember arguing with one of my colleagues who's a chemist whether or not this would be a major medicine and I was he had a hard time seeing that you could value a drug that's going to be a five or10 billion do seller and his one of his issues was that it was hard to give that much credit for a drug that hadn't come out yet and I think one of the things I taught him he's a very smart guy so I I didn't get to teach him too much one of the things I taught him is that yes sometimes you you can be comfortable saying a drug will sell five billion or 10 billion um and you could actually be underestimating it like the covid vaccine was way underestimated um so when the volume AB was coming around I said this this could be a 10 billion drug and he was like n no way it's crazy you can't you know value that assuming that I was like well how about you know can you value it assuming 1 billion so that's way undervalued so sometimes you have do have to make big projections so anyway um opdo opdo ended up being a very very big drug in fact it's it it was kind of lucky because it had its first full year but it was one of the biggest drugs ever in its first full year take a look at that isn't that crazy it was actually outpacing a lot of these drugs but it slowed down really fast because Kuda kind of out executed and you can see it just hit a wall and even though they were first Kuda just bold these two the check Kuda kind of won the checkpoint Wars so you can kind of see Bristol Meyers starting out red hot and then Kuda kind of taking over rather quickly so really unfortunate for Bristol kind of that they lost the pd1 wars and if you want a really good like case study on nitty-gritty Pharma like super nuanced Pharma I would study how did MC beat Bristol Meyers to win the pd1 wars they about 67 65% market share even though Bristol was first they understood the mechanism a lot better man can Merc was not a cancer Drug Company MC did no oncology whatsoever no Heritage in oncology Bristol Myers invented Kimo they literally invented Cho they invented tax all and so Bristol Meers long Heritage in cancer they did herbo with him clone they understand cancer they've been selling Cancer drugs for years and Bristol Meers gets out foxed by MC MC's not like a substantially bigger company or anything but MC figures out how to sell this medicine way better than than Bristol how and why is a long story I'm not going to bore you with but it it is if you're really interested in Pharma uh like you work in Pharma for a living like this these sto these are the stories that matter all right so it's growing a tiny bit but eventually novalab will go generic just like every other drug but it won't go generic in the same way because it's a biologic it's one of those really big molecules it's hard to characterize it's hard to know exactly what's going to happen to it so so but when bio similars come out they have almost like a generic like Decay so there's that and then like I said let's see kind of what the company says it doesn't hurt to ask them Bristol Myers is a big company they're you know usually pretty honest and back in the old days nobody trusted them actually there's a good reason for that um so they're saying the volum at patent 2028 and um rest of world like 2030 is but most of the revenue is probably in the US so 2028 and then biosimilars start hitting that's not good they're trying to do a subcutaneous formulation of n volume AB so instead of an IV you can use a subcutaneous but I think that it's not going to go go well and checkpoint Inhibitors have largely been kind of like well understood in terms of where they work and where they don't so I don't see this Market growing very much although I think mk's still growing which is amazing [Music] um so these are kind of boring drugs and a lot of the bigger drugs are kind of boring there's not a whole lot of sophisticated analysis you'd have to do it's just like okay what's the forecast we'll get to some pretty exciting analysis in a second um so let's let's move on to revid revid was is an amazing drug you can write books about revid and I think somebody should um revid came from a a company called Cene and Cene pioneered a drug called fide phide was a drug that basically caused the creation of the FDA fide caused birth defects it was given to pregnant women intentionally uh for um I think for sence or something like that or to induce to help them sleep and it ended up causing birth defects and the FDA didn't approve uh theide yeah this is live what's up guys uh what should I major in in college that's a great question maybe you shouldn't go to college at all um so anyway um yeah maybe computer science these medicines save so many lives they're so amazing and it's important that this pharmaceutical ecosystem keeps making money because we wouldn't have these drugs otherwise and the amount of life that's been added to the world through drugs like ABDO and revid is incredible I have friends whose lives have been saved by rment um I think day trading indices is our worded as YouTube so I can't say regarded it's rather regarded um there's one really good book about Pharma and I'll share it with you in a minute but in general these kind of things aren't written in books they're oral histories they're in conference called transcripts and so forth I really think a math degree is is one of the most valuable degrees you can get programming language I think JavaScript or python are largely have morphed into one um they're obviously not the same language but in a lot of ways their features have kind of slid towards each other as best practices in the programming community so like everything you can do in Python you can do in JavaScript and vice versa really the biggest difference between them is execution context so Python's very good for machine learning in AI it's basically the only thing you can use and JavaScript is obviously the web so the libraries are really different like react is the most popular library for JavaScript and and for Python and stuff like pytorch and pandas so if you're interested in like Finance data science AI Python's the way to go if you're more interested in like generic business including apps and web apps and the net the internet um JavaScript is a way to go they're both the same though you learn one you can learn the other um all right let's keep going on Bristol Myers so again one of the things a lot of people ask me and I think one of the ice coffee guys tweeted me the other day um I don't have a lot of money how do I get rich well uh I was in this exact position when I was 16 and I basically said I looked around Wall Street and I said these people need to know what to do about drug stocks and if I become a drug stock expert and I I don't have any money at this point I'm a 16-year-old Albanian immigrant son um but I see that you know wall Street's really exciting people are trading millions billions of dollars so for me I liked drugs uh from a childhood I I really enjoyed chemistry and biology and I thought it was amazing that medicine could change people's lives like that and you can go from dying to healthy because of a drug you could also go from healthy to dying uh and it was all Through Chemistry and Science and I loved that and um the point is that even with no money I was able to provide valuable advice that people would pay for i' say Martin what what stock do I buy and I sometimes I was right sometimes I was wrong but I also learned a lot about medicine and that was invaluable when I started a drug company anyway drugs to me don't mean illegal drugs I've never taken illegal drug um but um for some people that pops into their head when I say drugs I mean the pharmaceutical industry all right so anyway opdo has largely been like milked for what it's good for it's like kind of over um what's interesting is there was a small royalty frivo to this Japanese company and they make a fortune from this royalty it's very funny but Bristol owns almost all of obdo but that little bit that goes to the Japanese company because it's such a big drug it actually is for pretty valuable up Divo is actually a little bit more balanced internationally it's look like 6040 roughly they're still developing up Devo pretty extensively but I don't know that it really is even worth it there's Ono that's the Party by the way that has a tiny tiny royalty it didn't come from Ono it came from metx um which was an old old biotech company that they they bought out just going to write that here origin metx and so anyway we have a sense for X Bri frivo let's go to let's move to to revid so I was mentioning that revid was is this incredible drug and it is revid ended up um becoming the Marquee treatment for multiple Myoma which is a very rare cancer but revlimid has gone generic and it's in a weird decline phase because it's in a very strange circumstance it sort of declined very slowly and again Bristol Meers bought Cene let's see when 2019 I don't remember when the deal closed but I was in jail when this deal happened and I was analyzing it very carefully I thought it was a good deal um in fact some of my inmates my my the people I was in jail with they woke they woke me up and these are guys who are drug dealers Thugs and they're like Martin there's big news about a big drug merger you should look at it I said what they said it's called a cell gene or something like that I was like oh [ __ ] I looked it up and it it's so funny that they knew what I was interested in and they were like I saw it on the news you should check it out um you know so that was really really funny that you know that was the kind of you know interactions I had have all right so revid is um sort of like in this weird slow Decay and it's going to continue to sort of Decay over time and it actually doesn't matter very much how much it decays um because it's going to Decay to to nothing in essence it may stabilize but it probably will Decay to nothing you can see almost all of the sales there are in the US almost every almost every dollar um and so the trick with revid is like thalidomide it causes birth effects so they kind of like sneak through the patent system by not patenting the drug but patenting the birth control system and that kind of got them a little extra time and a little extra patent life than maybe they maybe they deserved so that was a kind of a crafty move um for for rid um and they got a lot of flack for that all right so looks like 2026 revenue for rid will really decline substantially but they've already declined pretty substantially as you can see here the sell Gene merger closed so you don't book the revenue the old Revenue but I think we can kind of like include the sell Gene Revenue just not as a as a number that'll be used in the sum but we should just put it there but once Bristol took over Revenue revid they got to report the revenue and you can see it was it was actually a huge drug and the s de was weird and we are going to talk a little bit about the general philosophy of Bristol not just drug by drug but Bristol has been in a deal making mode for the last five years the sellan deal was gigantic and it didn't really pay off it was just like a bizarre financial transaction where they you know what Cene was it was just a revid cash cow and so basically they got to they're basically just buying the revid earnings and the pomal list earnings and just putting in a box so like you could see see that there's about 60 billion here of revid and pist pist is a lot like revid it's pomalidomide so they basically took theide which is a super old drug changed an atom and they called that lenol lamide they change another atom and they call that pomide and they actually done that a bunch of times and they get a new patent each time um they are slightly different drugs but they're generally the same but they all cause birth defects so they have to be restricted access and that restricted access paradoxically gives them this long patent life which is uh you know pretty wild to say least so relid will keep declining I think but it'll really fall off a cliff come 26 20126 so let's model it like this let's model it dropping 10% a year and then starting in 2026 yeah really falls off a cliff um that's where in the unrestricted January 31st 2026 unrestricted volume from generics right now it's restricted volume license Okay so we've actually been able to look at their three biggest drugs in relatively short order not even an hour I don't think um but now we're going to start looking at kind of some more interesting drugs that we may or may not kind of like be important and some of these drugs are growing really rapidly and we're going to have to pay really close attention because if you know Finance you know that um for example that let's just zoom in really closely if this number in 2026 instead of 1 billion let's say it's three billion and this number for 2027 instead of 20000 million is 1.5 billion and I misestimated the the severity of the drop off it actually won't matter much in the npv and I know you finance students know what I'm talking about um aakam is not a big seller Zam these are only the biggest Revenue drugs so if you know Finance you know that in the scheme of a hundred billion do npv these whether this stream is 1.2 billion in aggregate or five billion in aggregate it might change the npv by a billion maybe but it really is not going to move the needle huge amount of course these little mistakes do add up but it the big question is will there be another elquist A10 billion doll drug or something like that that's kind of the key thing so keep that in mind um pist like I said is sort of son of revid and there's a son of pist coming as well um but pist um let's see where the pist patent comes out they're saying it's kind of already uh pist we do not expect generic entry prior to 2026 huh that's not good so if generics come out in 2026 the issue is rist Myers is looking at this big patent Cliff okay um so let's just do what they're telling us to do which is model this big cliff in 2026 is pomus growing not very much and then 2026 is the all right it's pretty easy so these are kind of both 2026 and that makes sense because they're both share the same kind of like intellectual property and stuff like that okay so these were pretty easy to forecast now we're going to get into drugs that are really hard to forecast and we got to understand them really well Orencia is maybe the first one we'll look at but then we'll look at um um razol but also like um spry all will be really interesting to look at let's see here all right so Orencia is a weird drug it's a ctla for soluble receptor so it works like an antibody but it's a ctla4 um I want to look at the old Revenue oh I have it going way back it's a 2006 you can see that it was like a very slow grower it was kind of this um drug for uh rheumatoid arthritis that was like for people it's like last line rheumatoid arthritis let's see it was approved 12 um actually let's go back 12 2005 approval doesn't really matter what the exact date is but it was approved 20 years ago and it's still not generic or no biosimilar either so that'll be kind of interesting to see what'll happen there but you can see that um in the scheme of things it it wasn't a huge seller but it started to hit the soal called Blockbuster status um right around 2012 so that was um that's when drugs like really materially large um it's often said that at Big Pharma if it's not a blockbuster you don't really care and so rcia was kind of a disappointment for a little while but then it ended up kind of being a pretty big product and you can see here that it is fairly big product and now we're just going to go to one more thing and you can see it's kind of chugged along every year it's gone up a little bit and that's what's cool about biologics is that they can really last a long time there's no small molecule that's lasted 20 years so because it's hard to make it's kind of like gets this extra intellectual property which I know makes you know different regulatory authorities mad but haters can stay mad um and so it's kind of an amazing thing if you think about it I mean it's gone up every year it looks like without fail um right every single year it's gone up in Revenue 18 years in a row and so what are people really using this for now and why is it going up and one thing we could do is we can look at the prescribing information which is often colloquially called the label let me put in some like placeholder numbers for for a second just so the numbers make sense for the annuals and we can see that Orencia we can add oh we can put the line here doesn't look like it's it grew very much last quarter single digits growth very very slow growth for the last year or two but at one point was double digit growth and so yeah are people using this for or doctors using this for Ru arthritis are they using this for some other disease let's take a look at the label and you usually just go on like aria.com and it's it's there somewhere and just off the bat you can see it's it's for rheumatoid arthritis and that's is that all it's for though and what's interesting about it is it's a ctla4 inhibitor we're going to talk about that mechanism a tiny bit um you know all these support programs so that you can make sure you get the drug and okay it looks like they have three labels ra polyarticular Jia which is basically ra for kids and psoriatic arthritis which is basically ra with psoriasis and so it seems like that's all that it's sort of good for and rubor arthritis is a big Market but drugs a little inconvenient for ra there's a lot better drugs for ra and ra is one of the biggest markets for pharmaceuticals you guys probably have heard of Huma which is the biggest selling ra drug although there are other drugs that are coming out a lot of them from the same company ABY that compete with arenia so it doesn't seem like that drug will grow anymore so big question is will um for biosimilars for the big antibodies it makes sense that there'll be um biosimilars but for some of the smaller drugs it actually costs a lot of money to make a biosimilar so there's a reason Orencia still hasn't sort of um gone generic so this goes way back when when they were kind of launching it it is an IV which is a pain in the neck it is very complex drug to make but um let's let's sort of see if we can um learn more about it one of the things I always like to look at is dosing oh they do have some more indications intravenous used for prophylaxis of graphers host disease that's gvhd for anybody who doesn't know that maybe they just don't promote gvhd it's not a big indication either way but you can see gvhd as well I thought it was good for a lot of different diseases but sometimes a drug is good for a bunch of diseases but not FDA improved for them and doctors will give it anyway but expensive drugs like this the price of we can we can look up the price of about a something called red book or we could just Google it and see what the right rough price is if we don't need to be too quantitative let's do um Orencia price looks like I also want to know the dosing I want to say it's monthly every four weeks okay so it's monthly and it looks like every infusion is around $5,000 roughly so pretty expensive let's see renia vile price yeah the price has gone up a lot since this study this looks like an older study yeah back then vile was $480 now a vial is $1,500 it's around 60k a year but if you have severe rheumatoid arthritis it's pretty bad so the question is do people mostly use this drug once they fail a tnf inhibitor because it works through a different mechanism and let's talk about the mechanism a little bit ctla 4 inhibitor or yeah C4 inhibitor and it's amazing that Google has these like new quick search things but it inhibits t- cells signal to t- cells it's a little counterintuitive right ctla4 is also called cd152 I used to know this mechanism a lot better um it's fairly complicated for for so I guess it acts as like a a snc it's a soluble receptor and it'll bind to cd80 and cd86 so those molecules can't stimulate t- cells so it works for gvhd it works for all these immune sort of specific diseases like rheumatoidarthritis so it makes sense that it would be clinically important there but what's interesting is they probably tried in a bunch of other diseases and then it it didn't work as well so it's kind of interesting that some autoimmune drugs work for some diseases and not others so it's not an inhibitor it's really just like a fusion clone so it it is literally soluble ctla4 soluble receptor so it it's like increases the expression of that okay so where are they going with renia and will there be a biosimilar are the big questions for that this is not the recent 10K it's really old 10K looks like not aware of a biosimilar on the market H so the question here is when will there be a biosimilar and what will look that look like if there's only Two drugs the original and a biosimilar on the market they'll share the market and I'm just going to Google Orencia or bi similar and then it might Google like um the bat asep biosimilar it looks like there is something in the works here huh Dr reedy's they made a generic to one of my drugs der Prim bastards bloody bastards it's an Indian company um but they want to try it for other diseases this company COA which is publicly traded I never heard of these guys chat you heard of these guys can you believe this chat Coya let's add them to the list COA theraputics oh they want to do it an a ALS that's kind of crazy Houston biofarming company kind of cool shout out to Houston okay so it looks like Dr reedy's is doing something they're pretty serious um that's interesting momenta and milin tried to make one but it failed which suggests maybe it's not that easy yeah this this looks so so how do you model this this is really interesting when will the Dr Ready's drug come out will it even work because the milin milin biosimilar failed and this is more than than large enough opportunity to make a bio similar it might be the manufacturing that's difficulty that's difficult I want to take a look at that in fact there's an FDA a little secret piece of the FDA website I'll show you right now probably not even allowed or should be showing you this but they changed around a little bit as well it's a lot to the FDA website if you look around enough you can see a lot of cool things so here's Orencia but if you go through here you can actually see the FDA review documents maybe not for the strug they they don't do it with the like sometimes with the biologics which is frustrating oh here we go yeah here's the review okay so if you want to see the chemistry which how you make the drug you can kind of get a glimpse of it here and this is a assuming a large document no 25 pages and they redact a lot of the stuff as you can see some of this stuff is going to be redacted it doesn't look that hard to make Recon combinant fusion protein of human ctla4 which you can just get that sequence and the fragment crystallizable or fragment constant of Amun globulin G1 not hard to get that either just maybe a little bit of a trade secret on exactly how it's linked maybe let's take a look extracellular domain of ctla4 so it's just the extracellular domain of ctla4 maybe not the intracellular side fused by genetic engineering to ig1 including the hinge ch2 and ch3 domains disulfides were eliminated by the introduction of three mutations in the igg1 uh hinge region so d sulfide sulfide bonds are sometimes pretty annoying okay so so there it's a natural homo dier so they're kind of making a monomer oh okay so they no they make it a homod dier there's glycosilation that's one of the hard things with these things is like your manufacturing method has to get the same glycosilation at the same amino acid residues so very hard to make a generic right chos cells obviously you can see all this redacted stuff sometimes things appear in here that shouldn't even though they're redacted okay here's the manufacturing facilities in Syracuse you know I might just become a janitor in Syracuse just mooping the floor get a little janitor job Syracuse at the Bristol Myers plant it's chilling me know speak English as I mop the floor of the important no it's funny you can't mop the floor of these manufacturing facilities they're like clean rooms and all this kind of stuff it's not simple to uh just get a job there for and there's a lot of cool details here like the product is designed to inhibit B7 cd28 mediated co- stimulation very direct you have to guess so there's some assays to do that it's very hard to make biologics and these are the redacted portion here is Trade Secrets now you could like I said find out how some of the stuff is done but you can also get sued Trade Secrets don't um interestingly they last forever there's no expert on Trade Secrets all the stuff is redacted because the FDA has the data but they don't want the public to see it six manufacturing processes these ad I wonder if the Dr Ready's product may never come out anyway it doesn't look super hard to make but it's not just like a plain antibody this will probably be one of the most complicated bio siers ever made and it's not that complicated but even one tiny change to the glycosilation of one amino acid can make it entirely immunogenic which means that you'll have an immune response a major immune response to the drug which is basically just not not going to work out you want it to be exactly the same so I'm going to make the call that this won't go this won't go biosimilar it's not going to grow a lot but the fact that it's not going to go biosimilar until I see more evidence from Dr ry's and we can go look at Dr R's financials and see see I bet you that this drug is going nowhere fast and it'll just be this three three and. half billion dollar Cash Cow for Bristol yeah why not that's how we'll do it you can take a risk adjusted approach and maybe in 2031 just start dropping it by 10% because you know there might be other drugs that come out it might go generic but you can see that for the long tail all these other drugs are kind of going to go away whereas orcia is going to stick around maybe I should be a little more charitable to some of these guys what do you guys think okay so will Aria go generic or not important for Bristol not the end of the world but if you do a discount of these cash flows like it's a lot it's actually a lot so let's say you discounted 7% because this is like money is as good as good as gold these people have been on Orencia for 10 15 20 years they're not going to stop taking the drug so there's no risk to this cash flow it's just pure cash flow it's actually a big deal you're talking about 2020 billion of discounted cash flow so if it went bio similar so that's 25 billion right so let's say it went bio similar next year or two years from now or whatever and they would split the market immediately I'd say 50/50 but at a lower price point so you'd be looking at a pretty pretty sick decline there and let's do the npv of that I don't know if I how I did it with the last one but that's 12 billion oh yeah it's not even including the first three so technically yeah 9 billion or 25 billion big difference right it's not in the scheme of things going to really make a break Bristol Myers but it's good to know you know a lot of people on Wall Street say oh it's a driver for the stock I need to know the drivers for the stock yes that's very important but how much is the portfolio worth is important too so we've looked at at this point and evaluated pretty carefully I think five their five biggest drugs the other drugs are very important as well but we also have to look at their pipeline how do you know which so so we'll look at the other drugs too but let's take a break to look at the pipeline some of their drugs just came out so like you can almost view them as pipeline drugs like this drug so tick to really really important drug could become a really big seller um I would put um csos in the same category and we're just going to have to sort of see where Bristol Myers is in research so how do we do that it's really hard um I have some older drugs um here but carks T is probably going to be their biggest new drug how many billions will this sell is going to really be the major question for Bristol Myers now what's KD well they just um bought a company that had this drug called karuna and they spent a lot of money to buy karuna and this is kind of the issue with Bristol Myers is that they're spending tons of money buying these companies what are they going to get out of them that's the question and it seems like they're not doing great deals I hate to say it but I said it um it seems like they're not doing great deals um the Cene deal wasn't that great oh there's the subcutaneous n volume ABS that's the effort to kind of move the volume AB from biosimilar IV to subcutaneous if they can get people to take the subcutaneous that that's a good life cycle management plan and we don't really give them any credit for that we just assume that IVs will happen for op Divo and there's no way around it the drug will go to zero but if they offer a subcutaneous shot they might be able to move some business there and maybe we should account for that let's account for that like this yeah so so how big can this drug get there's the completion of karuna 12 B roughly 12 billion dollar they paid to buy coruna for 12 billion cash money PFA September that's the FDA approval date it's very likely to be approved that's just uh [ __ ] I mean that's just a month from now we're going to have the First new type of schizophrenia drug maybe 40 years that's pretty cool that's going to sell that might be a 101 billion doll plus truck this is where the creativity and the intellect are going to kind of show everything we've done up until this point is fairly dry I mean took a little bit of Industry knowledge a little bit of intellect but what we're going to do here is going to be really important is going to kind of be the the delta in the analysis and you might ask why not do that first well I could have done it first for sure but I just want to get my feet wet and remind myself what all of the assets of Bristol and the basic landscape of it and then we now that we're comfortable with that we're going to look into more detail so yeah 12 uh 14 billion actually $14 billion deal 12.7 net deal so huge deal but probably could be a a good product now looking into this is going to require us to really understand the landscape for that specific disease and that specific market and there are many drugs that are trying to compete with this Market I'm going to make a new little um sheet for car's te car XT what is it Z zoline I think is the name of the drug it's surprising they don't have a well it's not surprising they don't have a new brand name they'll have one very soon but they just call it k a r karuna XT I don't even know if that's how you say it but the mechanism of action is really important here and it was really surprising that this thing worked um and so I just want to get the yes zamine and um trospium and both drugs are off patent so this is going to be like kind of an issue um for this company because without um a patent you're sort of in trouble but basically what's what's fascinating is you have muscarinic um receptors in your body and in your brain and what they do in your body is very different from what they do in your brain and the M1 M4 agonists for your brain they seem to reduce schizophrenia which is great but in the periphery they're going to cause side effects what they what they do is they give trospium which only because of its chemical properties only stays in the periphery which is everywhere but the brain and it counteracts it by blocking those receptors it's kind of genius chemistry but the problem is trospium is a super old drug and zamine is an old Lily drug that's bit off patent forever so how long will this drug really last now you get five years no matter what if it's a new molecule so we know they'll get get five years but you don't want a drug Dr for five years you want it for decade ideally maybe more if it's a biologic you get even more years but that's the big question with karuna now this is where kind of like our our little launch thing is actually useful so we can kind of plan out okay well what launch could this look like could this be like one of these or bigger I would argue this drug is going to be a monster this could be one of the biggest drugs ever schizophrenia is a weird disease a lot of people don't understand it there's about a million schizophrenics in the US um they take D2 antagonists so D2 antagonists probably the most popular one is called risper dool but there's another one called aifi uh maybe bifi is more popular but there was zpra Haldol many others and actually we can look at Johnson and Johnson's um schizophrenia medicines as an example should be able to beat those right and those drugs hit several billion in fact we could just go look at our J&J model and this is why I recommend people who want to become professional investors they stick to one's sector because the things you learn from one company will maybe teach you about another company if you know how transistors work for Intel they work the same way for NVIDIA you don't have to learn brand new stuff but if you do biof Pharma and you do uh semiconductors you're going to be have to you know you're have to learn a lot of lot of stuff um so it's about A4 billion medicine for J&J but it took a while for J&J to sort of penetrate that market yeah this could be a really big drug let me let me take the first brush Strokes happy little trees here in a second for me it's happy little billions I draw in like Bob Ross let me just draw in some billions so the first three last three months of 2024 won't matter that much but I you know maybe it'll do 200 put a little 1.5 billion here a three billion here 4 billion 5 billion I'll just just put that down there as the base we can analyze and shift as we see fit but the tragedy it's not maybe it's not tragedy to me it's a tragedy uh Elizabeth Warren didn't like it when I said this or was B Bernie Sanders one of those idiots didn't like it when I said every time a drug goes generic I cry a little tear I get sad it's very emotional for me because all those profits were so um so great yeah I would say there's an impressive amount of evidence that all in-depth research is worthwhile but we can argue over efficient market some other time um so will they get five years or more you know we can look at this question has been asked many times so where do we find the answer we can actually look at SEC filings again so what we do here is we're going to look at a company that they acquired which is called karuna so karuna was public right and they had their own 10 qes and 10ks and in one of those they must have talked about okay here's what we thought our intellectual property would be and look at this amazing company coruno they basically started it for nothing and they turned it into a $14 billion acquisition by Bristol Myers they basically turned a million dollars into 14 billion that's why you do this research because maybe you'll buy Bristol Myers for a low price and put in your 401k maybe you'll be wrong but you may be able to put the pieces together in your head how to do that yourself there are Channel checks in uh bioferm I'll explain that maybe sometime later all right so so here's the karuna 10K this is before the Bristol Myers acquisition let's look at intellectual property see if there's a place they discuss this and I I'll Google Patent as well they raised about a billion dollars so they started the company 15 years ago they raised a billion along the way and sold for 14 billion pretty cool they paid literally $100,000 for this drug and now they sold it to Bristol Myers for 14 billion that's what it's all about the vake myself these are the deals that uh make dreams come true $100,000 unbelievable it's interesting they're not talking much about patents as far as I can tell here okay there's something here 20 2030 xpre without pte so these patents will be challenged basically right away and 2030 isn't isn't that much further right oh 2030 xree regardless so I might do the easy thing here well they could get patent term restoration that's without pte but pte is only a couple of years so what's interesting is this part of the curve is important but we know that after say 2032 or maybe 203 three that things will get really bad there they do have some other nonsense patents for 2040 or something like that but you can never trust these things in biopharma and in other Industries companies try to dress up their patents and pretend that uh they're useful but the problem is that's just not how patents work and we'll see if we can I can show you okay okay this is interesting so this is a Chinese patent I don't want to look at that no offence okay this is a global patent so so this is an an interesting patent because it's a composition of zoline which is well known and trospium and then this thing what's this thing the hell is this is this this this is an Eline looks like it it's amazing it says schizophrenia affects 0.5 to 1% of the population so that would be more than a million people in the US patents are also very good in the sense that they teach you quite a bit about the industry if you read them okay so this is the plurality of zoline beads which this is particle size I suppose what half a millimeter the beads are half a millimeter I don't know that that's GNA work as a pattern sometimes you can win on a formulation patent but it's fairly rare okay so I don't think that formulation patent is going to go very far I'm curious if it looks like they maybe invented a new a new drug I wonder if they put this into the clinic Oh either way the drug that's getting approved is not a does not have a good patent situation the most important thing in patents is something called prior art if somebody invented something like your invention before it's not an invention anymore that's the general idea of prior art okay so they were developing other miscar enics but those follow on drugs may or may not I've been getting close to phase one uh what's interesting here is the is you have some of the clinical data here very impressive I couldn't believe my when I saw this data this is um pans is positive negative symptom scale so this is how you measure schizophrenia the higher the more symptoms you have positive symptoms are ones that the mind creates like hallucinations negative symptoms are ones that are taken away from the mind like um cognition or um slurred speech or disordered thoughts so this reduces it it seems like it reduces the positive symptoms and the negative symptoms most of the schizophrenia drugs now just reduce the negative symptoms I'm sorry the positive symptoms so the fact that it could also reduce negative symptoms is a big win this is going to be a huge drug I just don't know it's going to last very long and again we can kind of split the baby but I'd rather make a call but since we're so the patents they have are not very good and even if they were good they still expire in 2030 and even if they get extended the worst they could expire is 2032 so basically and it's a small molecule so when it goes away it's going to go away bad so basically we can kind of forecast the end of the curve and you're just doing an npv of like these years the only question is are we going to get well let's assume we get five years what's npv of that and again not much discount rate because well this is four years we're going to get like half half of that year or most of that year so that's 13 billion and what's funny is this is exactly what Bristol paid for the drug we were talking about efficient markets earlier it's 14 billion in Revenue well they paid $ 14 billion for it so it kind of makes sense right um but let's say it keeps going which I think maybe they'll get another year or two and then maybe it gets even goes a little further now you're talking about 28 billion well it's going to cost them some money to sell the drug by the way so it's not going to be 100% margin but that might make more sense now what if it's a much bigger drug than that let's go ham let's see year two you rarely see three billion so I have a pretty big year two here it would be like one of the biggest ever well munaro hit six bill so that's possible and then year three I got four billion down it's very rare for drugs to hit four billion in year three but ABDO did Kuda did OIC did mjara Will and then year five I have six billion so I'm sort of forecasting it will be or I have five billion I'm forecasting it'll be one of the biggest drugs of all time but I still wonder if I'm not forecasting enough which is kind of crazy right as weird as these estimates look just like a billion a year for nine years except for the first year which is 1.5 and the next year is three and then it's a billion each year it's probably accurate it's funny this 28 29 billion dollar number is like the largest any individual drug drug company goes for like remember pharmacyclics kind of went for a similar amount it's kind of like the cap of any drug startup it's like 29 billion of course these guys sold for 14 but you remember fassad as well also sold for around 14 okay I think like the people that took zoline from Eli Lily for 100k and sold it for 14 billion it's kind of an amazing thing it's a not once in a lifetime but well for those people it's once in a lifetime but I would say a deal like that happens every year in biopharma and if you follow the industry close enough you can see where those opportunities are yeah right president Harris is going to say no no more patent for Bristol Myers This drg belongs to the people okay so maybe that's cark te for now or zenine I should call it really so that's their big drug I would agree that it's very hard to beat the market um you would have to be basically a professional meaning that your whole life is dedicated to investing and even then most of the people who have that job don't beat the market so it's a competitive field it's kind of like MMA or boxing like you could be a professional boxer and still have a less than 50% win rate and you're a professional boxer look at the NBA look at the worst team in the NBA my my hometown team is pretty bad the Knicks the people who play for the New York Knicks are amazing basketball players they're some of the best in the world but they still have a terrible winning percentage compared to Great teams like Golden State or something like that so even professionals can be not good professionals relative to their their Rivals so we sometimes say oh those guys are bum well they're not bums they're amazing basketball players they're some of the best of the best but there's others that are still better wall Street's the same way um there are people that make billions of dollars on Wall Street and there are people that struggle and you know they they don't do that great and just to get on Wall Street requires some pretty pretty deep dedication to success but to then to Prevail and succeed in Wall Street it's very very difficult okay let's keep looking yeah I could beat the Knicks by myself the Knicks suck man I used to watch Patrick Ying Allen Houston John Starks all right so again they they're kind of focusing on subcutaneous navali MB anticipated launch of carass te which we talked about a second ago okay syndab let's look at syndab there it is il 13 inhibitor this thing got approved like for example the deal they did to to buy turning point I think is going to end up being a really crappy deal they have some Cell Therapy like brazan looks like brazan is starting to sell okay but this drug so tick two is going to be the most important I would argue so tik2 is off to a slow start though let's see if they have a website for their pipeline usually they do brzil is like a really focused pipeline like a lot of these other drug companies have decided to like spray and prey they're like really really focused on a very small handful of opportunities like you can anti fuc coal gm1 relatab I think relatab is dead or is that the that might be actually be be proved yeah yeah okay that's the lag three I think it's dead for other other indications perhaps ccr8 everyone has ship 2 everyone has pair mt5 everyone has s onean Everyone Has suppose the the Mora g12d drug could be big but Mora a lot of people [ __ ] on that drug bomide I wonder if that thing's ever going to get approved then there's migd deide then they have this other cart T another cart T gomide another imid these are kind of well known drugs this one kind of interesting so tick2 is like I said the kind of big big opportunity drug good night lpa1 antagonist these are kind of interesting wonder what those are okay Alzheimer's major opportunity tick two in for neuroinflammation that could be like depression something like that that'd be really interesting trip C4 and C5 doesn't feel like they have too much going on in neuroscience and then they still are developing Milian which is kind of like a new clotting drug pipeline kind of sucks a lot of the drugs they have other than car kxt a lot of the drugs they have they kind of they kind of are already launching and growing so like for spry is going generic should be very soon but it's taking forever rezil is going to be a really big drug your voy your Void the question is the same as Orencia will there be a bio similar and we can kind of take stabs at all of these really quickly I hate your voy I think it's the worst drug like I never understood why anybody gives it it's like totally useless but re Ral or razal Ral I don't know I love this medicine it's like such a great drug of dual lag I don't I wonder how the community sees that drug camio is kind of really bizarre it had this little like lull and but so Tik 2 is really disappointing like this is a slow launch this is a really slow launch and this was supposed to be like a really big drug so maybe they can pick it up but the autoimmune space is like super competitive I don't know if they're going to make it I mean look at renia it took forever but it ended up becoming three billion so it's okay if it takes its time catti I guess it'll look like that am gen drug as well this Drug's not going to be very big and then Clark T basically here this is yeah for for for okay so we can take a first stab at valuation sometimes I want to look at these numbers really carefully before I do the calculation for valuation because I kind of don't want to bias myself into thinking oh wow that's way too big or way too small but you know let's take a look so you can see this is sometimes like called a runoff model um in insurance and I think it's really valuable to do in biofarma because runoff just means that like basically these drugs will expire and they won't be replaced really by other medicines um let me just fill these out real quick okay and so with the runoff model you can get a really accurate assessment but you obviously can't predict what the company's going to do in the early stage pipeline if that makes sense okay all right so it's roughly a 75% gross margin and that's with um elois which is really low margin so they' probably be like around 80% margin without elquist so keep that in mind they still going to have eloquest for a little while but it's something important to kind of keep in mind I have to fill out this quarters but let's just assume uh let's try 75 although wasn't it like 79 second ago yeah maybe leave it at 79 okay and then we'll just do R&D like 1% growth okay same thing with R&D and msna they have a little bit of interest income which I'm going to [Music] ignore for now taxes kind of normalize around 20% looks like there was a onetime item here that's probably not going to recur okay so they're making around 4 billion a quarter it's a call it 16 billion a year and it's actually super cheap if you think about it that way but a lot of these drugs are going generic so let's keep looking it's like the moment of truth is coming okay I basically like to exclude R&D because R&D is a cost for future benefit and we're doing a runoff model so there's no future benefit so we're just going to do msna and what's nice about Bristol is that they they cater to these like really specialized disease categories which don't require tons of sales people and they used fiser to go after the elois which did require a lot of sales people one really important piece here is that they are in a net debt position which I'm going to try to forecast what that looks like so they're 45 billion net debt so like I said they're pretty levered up to get kxy and these other things is a noine stop calling it that okay so there'll be 19 debt at the end of 25 so they'll kind of be cash flow back in positive cash in a couple of years assuming this outcome which is obviously not set in stone in fact I can guarantee you it's it's actually not going to be what happens and for the forecast what I'd like to do is do some maturity which I'm going to put at negative 1% some Ro which is their return on Capital and then a discount rate discount rate is pretty low in Pharma um let's start with maturity and so this is basically what is the cash flow after 2035 and it goes on forever right it's going to be 100 years from now brist Myers will still be around just as Coca-Cola and Philip Morris and all those companies are um so we're going to take the npv starting from the end of 25 I guess or starting with 2025 and we're going to use the discount rate of course and then yeah go from here to there and we get 172 billion which is amazing and then we still are not done yet actually because we have to take the cach and get some return on that which isn't too big this is kind of where management genius is evaluated and I'm putting that pretty low for brist highers right now although the cars T deal might might show them that they're actually smart but and you know they did the uh this pup deal was pretty smart so sometimes they get them right but I think they look at the they paid three or four billion for this this cash flow stream which maybe you know it's going to end up being a little bit more than this but that was a really bad deal um I'm not sure they're going to get their money back and morate either so they kind of are kind of hit or miss on m&a um my opinion but I'm getting a pretty high stock price although one of the things to keep in mind here is that that's the npv of the business but you still do have to take out the cash um and add the dobt so the real npv or vice versa actually add the cash you have and then subtract the debt you would have to pay off if you were to acquire this whole company and so the share price you would get is actually the current stock price or a little bit higher I guess it's trading at 49 right now this is also somewhat conservative um Viewpoint in the sense that a runoff model is about as bad as it gets as this is basically like shutting down Ral Myers so 30 37% upside not much and that's almost like within our error bound like CU if I if I bump this to 8% for example you basically have the current stock price but it does seem on the cheaper side of things and I'm really not valuing any other pipeline assets and they definitely have a few that are going to make it not that many so there's a little optionality there but unless car is a n mean is going to be a 10 or5 billion drug pretty early which I don't think will happen or so tik2 all of a sudden like upticks pretty pretty heavy like so tick 2 could do really really well um but like I said it's kind of been a bit of a dog if it just starts all of a sudden like kicking ass which just doesn't seem likely Bristol doesn't have I mean they have an Immunology B business so I don't know why it's not doing so great I have to look at the data let's say so tik2 does really really great something like this you know the MPV is a little higher so and that might happen and then you have like yvo and Orencia biosimilars which are a big question can R loal get bigger if possible for sure um Can the cell therapy drugs get bigger can Kos outperform I think a bunch I think this is sort of conservative it's just close to Accurate as I can get but it's a little on the conservative side so I think Bristol is probably a decent long but I hope this gave you a good sense for like how I would model a big Pharma company and obviously we don't have all day to do this um I give you guys a couple of hours of what a Bare Bones um look uh a Bare Bones um examination but like theoretically like you would look into each drug really carefully and with tons of details um yeah sorry about the volume um I'm streaming on my Mac and it just doesn't have great volume but yeah it's it's a it's an okay long um so tiku would have to sort of pick up for me to be really excited and then maybe the cell therapy stuff would Happ have to pick up as well and then the launch of zenine would have to just be a monster which I think it will be I mean it's but a bigger monster than this which is not going to be easy I mean I would love to sell this drug I mean it's definitely going to change the game for schizophrenia which is a really big market so like these numbers could be really conservative and if you get the sense or you get the early read that like this is going to be bigger than we thought like imagine something like this happens you're looking at quite a bit of upside so if cart if zenine and so tiku execute sales execution really pick up you could definitely see some real upside here but that's kind of the the only scenario where there's a big win and you saw my numbers for the other scenarios where it's more close to fairly valued so it's kind of a easy long just because like you kind of can't lose you know even if the upside stuff doesn't happen you're kind of stuck with this boring large cap farma stock which you know if you have the ex extra room on your portfolio why not but if they all of a sudden start executing really well you know um you could see some decent upside but at the end of the day most of these big Pharma stocks going to be pretty boring um you know none of them are going to be that exciting um except for maybe you know an occasional one like Eli l or an occasional one like Novo Nordisk but typically these are fairly boring stocks it's better to look at them so that you can look at other companies um but um you know you might want to sell a company to bristle Myers you might want to buy one of their old drugs so that you can flip it for a huge amount to another company um but it's important to look at these companies just to get a good sense for them anyway that's kind of where I'm at um with um Bristol Myers it looks fairly cheap but not like jump up and down and buy it tomorrow kind of thing like if you're looking for a lowrisk stock that has some potential upside you know it's okay but you know I'd like to see how those launches go a little bit before I get really really excited as always you can find these models on my GitHub I used the godell software to help research this if you want to check out godell please feel free I created this with the hopes that I can make a better version of financial information software there's going to be a lot of cool stuff happening there so make sure you check out godell um it's a godell n.com it's still in beta and very early but you know we have a bunch of community members and users there and we talk stocks there all day and if you ever want me to look at a stock that's a good place to get me I've been um I did this Bristol Meers Deep dive for the