Bristol-Myers Squibb has been a disappointing investment for over a quarter of a century now. At cents below $50 a share, the stock price is back near the levels of 1998. After over 26 years, which included a 79% crash between 1999 and 2008, and new all-time highs in 2016 and 2022, most long-term investors have little to show for it except for the dividends.
But Bristol’s ups and downs are merely the result of Big Pharma’s business model. Companies make billions of dollars, while their patents protect their molecules, but a patent cliff inevitably awaits every drug in a few years. So the companies are in a perpetual race to find new blockbuster drugs to replace the revenues they are going to lose when the old patents no longer protect them. And that’s not an easy task.
Bristol-Myers is facing not one, but three patent cliffs as one of their main drugs started losing its protection in stages in 2022 and two others are about to go off-patent between 2027 and 2029. This explains investors’ rush to sell the stock in recent years. There is light at the end of the tunnel, though. The company’s new drugs are growing market share fast and management expects them to replace the revenues from the old ones and then some. So it is probably no coincidence that the stock seems ready to finally turn bullish, as well.
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The weekly chart above reveals Bristol’s stock price development from the bottom in 2008. It shows a five-wave impulse in wave I up to $77 in 2016, followed by an expanding flat correction in wave II down to the 61.8% Fibonacci support level. Wave I is marked (1)-(2)-(3)-(4)-(5), where three lower degrees of the trend are also visible. Wave II is labeled (a)-(b)-(c), whose waves (a) and (b) are both simple a-b-c zigzags with an ending diagonal in wave ‘c’, while wave (c) is, of course, impulsive.
If this count is correct, the 5-3 Elliott Wave cycle is complete and Bristol-Myers stock is ready to head higher again. In the long term, it can be expected to reach a new all-time high and possibly exceed the $100 mark. In addition to the company’s improving fundamentals and low valuation, this chart gives us another reason to keep holding the stock in our portfolio.
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