Can Bristol Myers Squibb's Restructuring Program Boost Earnings Growth?

Bristol Myers (BMY) is looking to boost its bottom-line growth as generic competition for legacy drugs (Revlimid, Pomalyst, Sprycel, and Abraxane) pulls down the top line.

In 2023, BMY initiated a restructuring program to streamline its operating model in key areas, such as R&D, manufacturing, commercial and other functions. The objective of this program is to ensure its operating model supports and is appropriately aligned with its strategy to invest in key priorities.

As a result of this program, BMY is transforming R&D operations to accelerate pipeline delivery, enhancing its commercial operating model and establishing a more responsive manufacturing network. Thereafter, in 2025, BMY expanded the scope of activities supporting these key priorities.

Consequently, the total charges for the program undertaken in 2023 are now expected to be approximately $2.5 billion through 2027, with $1.4 billion incurred to date. The remaining charges consist primarily of employee termination costs and site exit costs, including impairment and accelerated depreciation of property, plant and equipment.

The company expects to realize annual cost savings of approximately $2.0 billion by the end of 2027 due to the implementation of this restructuring program.

A leaner and better operating model should lift the bottom line and enable the company to navigate a slowdown in top-line growth.

However, BMY expects operating expense in 2025 to be $16.5 billion, up from the previous estimate of $16.2 billion. The increase reflects investments in recent business development transactions and the identification of additional investment opportunities within its Growth Portfolio.

Other Pharma/Biotech Companies Undertaking Restructuring

Earlier this month, Denmark-based pharma giant Novo Nordisk (NVO) announced a comprehensive program to streamline operations and reinvest in growth opportunities in diabetes and obesity.

As part of the restructuring program, Novo Nordisk plans to reduce the global workforce by approximately 9,000. The workforce reduction is expected across the company, including staff areas and headquarter functions. NVO expects to realize annualized savings of around DKK 8 billion by the end of 2026.

Another pharma giant Merck (MRK) is also restructuring operations. The company had earlier launched a multiyear optimization initiative to transform its portfolio. In July 2025, MRK undertook a new restructuring program to eliminate certain administrative, sales and R&D positions even though it will continue to hire employees into new roles across strategic growth areas of the business. MRK will reduce its global real estate footprint and continue to optimize its manufacturing network.

MRK expects these actions to result in annual cost savings of approximately $1.7 billion, which will be substantially realized by the end of 2027. This restructuring program is part of the multiyear optimization initiative expected to achieve $3.0 billion in annual cost savings by the end of 2027.

BMY’s Price Performance, Valuation and Estimates

Shares of Bristol Myers have lost 16.5% year to date against the industry’s growth of 4.9%.

From a valuation standpoint, BMY is trading at a discount to the large-cap pharma industry. Going by the price/earnings ratio, BMY’s shares currently trade at 7.36X forward earnings, lower than its mean of 8.46X and the large-cap pharma industry’s 14.83X.

The bottom-line estimate for 2025 has moved north to $6.50 from $6.37 in the past 60 days, while that for 2026 has moved north to $6.07 from $6.02 in the same timeframe.

BMY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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