WEBVTT 00:00:00.000 --> 00:00:02.439 Welcome back to The Deep Dive. Where we go beyond 00:00:02.439 --> 00:00:04.540 the summary and get into the real story behind 00:00:04.540 --> 00:00:08.599 the sources. And today we are tackling a giant, 00:00:08.820 --> 00:00:12.060 an absolute behemoth of the pharmaceutical world, 00:00:12.259 --> 00:00:14.759 Bristol -Myers Squibb. Yeah. And if you only 00:00:14.759 --> 00:00:18.199 know BMS from their modern reputation, you know, 00:00:18.199 --> 00:00:20.339 these incredible cancer drugs, you're really 00:00:20.339 --> 00:00:22.519 only seeing the tip of the iceberg. That's exactly 00:00:22.519 --> 00:00:24.780 it. That's the challenge for you today because 00:00:24.780 --> 00:00:27.800 the company that makes these breakthrough immunotherapies 00:00:27.800 --> 00:00:31.800 like Opdivo or that essential blood thinner Eliquis, 00:00:32.020 --> 00:00:35.119 their history is completely split. One half of 00:00:35.119 --> 00:00:37.420 it involves selling things like salhepatica, 00:00:37.560 --> 00:00:39.780 which is this popular laxative, and you won't 00:00:39.780 --> 00:00:42.119 believe it, Windex. Windex, from window cleaner 00:00:42.119 --> 00:00:45.049 to, you know, life -saving cancer drugs. That 00:00:45.049 --> 00:00:47.049 journey is what this is all about. Okay, let's 00:00:47.049 --> 00:00:49.149 get into it. Our mission today is to trace that 00:00:49.149 --> 00:00:51.929 exact path. We're starting with these separate 00:00:51.929 --> 00:00:53.950 19th century apothecaries. We're going through 00:00:53.950 --> 00:00:57.369 world wars, a huge painful pivot away from consumer 00:00:57.369 --> 00:00:59.829 goods, and some of the most staggering acquisitions 00:00:59.829 --> 00:01:02.909 in pharma history. And some pretty major controversies 00:01:02.909 --> 00:01:05.930 along the way, too. Oh, definitely. All to understand 00:01:05.930 --> 00:01:08.930 how they became this global biopharma leader 00:01:08.930 --> 00:01:11.379 we see today. And we really need to get a handle 00:01:11.379 --> 00:01:14.000 on the scale here. This isn't just a big company. 00:01:14.079 --> 00:01:17.299 It's a central pillar of the U .S. economy. It's 00:01:17.299 --> 00:01:21.579 what, 94th on the Fortune 500 list? 94th. And 00:01:21.579 --> 00:01:24.200 the numbers for 2024, they really tell the story 00:01:24.200 --> 00:01:27.640 of a company taking massive risks for massive 00:01:27.640 --> 00:01:30.319 rewards. So let's set the stage with those metrics. 00:01:30.599 --> 00:01:32.140 OK, so you're looking at a company that brought 00:01:32.140 --> 00:01:37.640 in 48 point. $3 billion in revenue. That's billion 00:01:37.640 --> 00:01:41.200 with a B. Huge number. They have 34 ,100 employees 00:01:41.200 --> 00:01:43.299 all over the world, but the heart of the company 00:01:43.299 --> 00:01:45.200 is still very much in New Jersey, Princeton, 00:01:45.319 --> 00:01:47.219 and Lawrenceville. Right. But here's the number 00:01:47.219 --> 00:01:49.019 from the source material that just jumps off 00:01:49.019 --> 00:01:50.799 the page. It really sets up our whole conversation. 00:01:51.140 --> 00:01:53.239 It absolutely does. Let's just drop it. Go for 00:01:53.239 --> 00:01:56.719 it. Despite that $48 billion in revenue, in 2024, 00:01:57.180 --> 00:02:00.579 Bristol -Myers Squibb reported a negative net 00:02:00.579 --> 00:02:05.230 income. A loss. A big loss. A loss of $8 .9 billion. 00:02:05.569 --> 00:02:08.110 Wait, say that again. They made $48 billion but 00:02:08.110 --> 00:02:11.189 lost almost $9 billion. Lost it. And an operating 00:02:11.189 --> 00:02:15.430 loss of $8 .4 billion. That is not a small discrepancy. 00:02:15.490 --> 00:02:17.610 No, that's a colossal financial signal. It tells 00:02:17.610 --> 00:02:19.650 you everything about their strategy. It really 00:02:19.650 --> 00:02:23.210 does. That $9 billion loss is, well, it's the 00:02:23.210 --> 00:02:24.990 price of admission for staying competitive in 00:02:24.990 --> 00:02:28.210 this decade. It tells you, the learner, that 00:02:28.210 --> 00:02:31.870 BMS is all in. on acquiring their future pipeline. 00:02:32.389 --> 00:02:35.509 They're spending today's money to buy tomorrow's 00:02:35.509 --> 00:02:37.550 revenue. So they're basically sacrificing short 00:02:37.550 --> 00:02:40.129 -term profit for long -term survival. That's 00:02:40.129 --> 00:02:42.389 the new reality in big pharma. You spend tens 00:02:42.389 --> 00:02:44.629 of billions on acquisitions or you let the patent 00:02:44.629 --> 00:02:47.090 cliffs just swallow you whole. Okay, that context 00:02:47.090 --> 00:02:49.169 is critical for everything we're about to talk 00:02:49.169 --> 00:02:51.590 about. But first, let's look at the drugs that 00:02:51.590 --> 00:02:53.669 are actually generating the cash that lets them 00:02:53.669 --> 00:02:56.370 make these huge bets. Record revenue anchors. 00:02:56.919 --> 00:02:59.900 And their portfolio is very concentrated in a 00:02:59.900 --> 00:03:03.020 few key areas. Leading the pack is Eliquis or 00:03:03.020 --> 00:03:05.000 Apixaban. The blood thinner. The blood thinner, 00:03:05.120 --> 00:03:08.219 yeah. They co -market it with Pfizer. And it 00:03:08.219 --> 00:03:10.500 is their single biggest product. It brings in 00:03:10.500 --> 00:03:14.539 28 % of their total 2024 revenue. Wow. So more 00:03:14.539 --> 00:03:16.639 than a quarter of the entire company's income 00:03:16.639 --> 00:03:20.479 rests on one cardiovascular drug. Exactly. And 00:03:20.479 --> 00:03:22.819 right behind that, you've got their work in oncology 00:03:22.819 --> 00:03:24.360 and hematology. This is where they're really 00:03:24.360 --> 00:03:27.580 famous now. Mm -hmm. Opdivo. which is nivolumab, 00:03:27.680 --> 00:03:30.340 that's the immunotherapy powerhouse, it drives 00:03:30.340 --> 00:03:34.719 another 19 % of revenue. And then Revlimid or 00:03:34.719 --> 00:03:38.259 lenalidomide for multiple myeloma, that's another 00:03:38.259 --> 00:03:41.300 12%. So just those three drugs, that's almost 00:03:41.300 --> 00:03:44.139 60 % of their entire business. That's a huge 00:03:44.139 --> 00:03:46.400 dependency. It is. And here's the other piece 00:03:46.400 --> 00:03:49.780 of the puzzle. Yeah. 71 % of all that revenue 00:03:49.780 --> 00:03:52.360 comes from one country. The United States. The 00:03:52.360 --> 00:03:54.560 United States. Yeah. So they are a global company. 00:03:55.000 --> 00:03:57.800 but their sales are profoundly American -focused. 00:03:57.979 --> 00:03:59.580 And that's going to be so important later when 00:03:59.580 --> 00:04:01.199 we talk about lobbying and pricing pressure. 00:04:01.479 --> 00:04:04.139 Absolutely. But to really get this, we have to 00:04:04.139 --> 00:04:08.120 go back, way back, over 160 years to two very, 00:04:08.159 --> 00:04:10.039 very different companies. Okay, let's start with 00:04:10.039 --> 00:04:12.319 the Squibb side of the family tree. The older 00:04:12.319 --> 00:04:15.639 half, and you could argue the more purely scientific 00:04:15.639 --> 00:04:19.160 half. Right. The Squibb Corporation. It was founded 00:04:19.160 --> 00:04:23.610 way back in 1858 by Edward Robinson Squibb. In 00:04:23.610 --> 00:04:26.089 Brooklyn, of all places. And right from the beginning, 00:04:26.170 --> 00:04:28.829 you can see the DNA of the modern company's focus 00:04:28.829 --> 00:04:32.209 on, you know, quality and scientific rigor. That's 00:04:32.209 --> 00:04:34.089 what makes Edward Squibb so fascinating. He was 00:04:34.089 --> 00:04:37.519 this absolute crusader for quality control. I 00:04:37.519 --> 00:04:39.420 mean, you have to remember, in the mid -1800s, 00:04:39.439 --> 00:04:43.160 pharmacy was like the Wild West. Right. No standards. 00:04:43.439 --> 00:04:45.899 No standards. Impure ingredients. You never really 00:04:45.899 --> 00:04:48.100 know what you're getting. And Squibb was just, 00:04:48.180 --> 00:04:50.079 he was outraged by it. That's why he founded 00:04:50.079 --> 00:04:52.040 the company. And he didn't just complain. He 00:04:52.040 --> 00:04:54.180 actually tried to change the system. The source 00:04:54.180 --> 00:04:56.399 material says he went to the American Medical 00:04:56.399 --> 00:04:58.920 Association, the AMA. And they basically blew 00:04:58.920 --> 00:05:01.379 him off. He couldn't convince them to adopt his 00:05:01.379 --> 00:05:03.939 incredibly high standards for purity. So he just 00:05:03.939 --> 00:05:06.839 did it himself. He literally did. He self -published 00:05:06.839 --> 00:05:09.680 his own guide, his own standard, called Squibb's 00:05:09.680 --> 00:05:12.220 Ephemeris of Materia Medica, basically saying, 00:05:12.259 --> 00:05:14.139 fine, if you don't do it, I'll create the standard 00:05:14.139 --> 00:05:16.899 myself. That's incredible. He was relentless. 00:05:17.019 --> 00:05:19.060 He published over 100 papers in the American 00:05:19.060 --> 00:05:21.660 Journal of Pharmacy. He was a true foundational 00:05:21.660 --> 00:05:24.399 scientist who just believed that the quality 00:05:24.399 --> 00:05:26.860 of medicine was non -negotiable. And that belief, 00:05:26.980 --> 00:05:29.779 that commitment, gets battle -tested almost right 00:05:29.779 --> 00:05:33.060 away. By the American Civil War. The Squibb Corporation 00:05:33.060 --> 00:05:36.279 becomes a major supplier of medical goods to 00:05:36.279 --> 00:05:38.579 the Union Army. And this is what really cements 00:05:38.579 --> 00:05:40.600 their reputation. I mean, think about the chaos 00:05:40.600 --> 00:05:44.100 of the Civil War. Squibb provided these portable 00:05:44.100 --> 00:05:46.620 medical kits. They were like mini pharmacies 00:05:46.620 --> 00:05:48.360 for the battlefield. Containing what kind of 00:05:48.360 --> 00:05:50.459 things? The essentials. We're talking reliable, 00:05:50.860 --> 00:05:54.160 pure morphine for pain, surgical anesthetics 00:05:54.160 --> 00:05:57.120 for amputations in the field, and crucially... 00:05:57.470 --> 00:06:00.870 For malaria. For malaria, which was just devastating 00:06:00.870 --> 00:06:03.050 the troops, especially in the South. Having a 00:06:03.050 --> 00:06:05.870 reliable supply of quinine was a massive strategic 00:06:05.870 --> 00:06:08.709 advantage. So that experience basically proved 00:06:08.709 --> 00:06:11.850 their whole business model, that purity and reliability 00:06:11.850 --> 00:06:14.810 matter most when the stakes are highest. It absolutely 00:06:14.810 --> 00:06:16.829 did. And it flows right into their corporate 00:06:16.829 --> 00:06:19.569 identity later on. When they incorporated in 00:06:19.569 --> 00:06:23.829 1905, their logo was built on four pillars. Uniformity. 00:06:24.120 --> 00:06:27.339 Purity, efficacy, and reliability based on research. 00:06:27.620 --> 00:06:29.819 You can draw a straight line from that motto 00:06:29.819 --> 00:06:32.379 right back to Edward Squibb's personal crusade. 00:06:32.439 --> 00:06:35.040 A direct line. Okay, so that's Squibb. Science, 00:06:35.300 --> 00:06:37.959 purity, military medicine. Now let's flip the 00:06:37.959 --> 00:06:40.120 coin completely and look at Bristol Myers. They 00:06:40.120 --> 00:06:43.060 get their start later, 1887, and the culture 00:06:43.060 --> 00:06:45.040 could not be more different. It's the perfect 00:06:45.040 --> 00:06:47.879 contrast, right? This company was founded by 00:06:47.879 --> 00:06:50.569 two grads from Hamilton College. William McLaren 00:06:50.569 --> 00:06:53.290 Bristol and John Ripley Myers. They bought a 00:06:53.290 --> 00:06:55.310 small company in upstate New York called Clinton 00:06:55.310 --> 00:06:57.750 Pharmaceutical. And where Squibb was all about 00:06:57.750 --> 00:07:00.069 high purity compounds for doctors, Bristol Myers 00:07:00.069 --> 00:07:02.709 went straight for the public. For the mass market. 00:07:02.870 --> 00:07:04.870 This is where the whole Windex due to therapy 00:07:04.870 --> 00:07:07.410 idea really comes from. Their first big national 00:07:07.410 --> 00:07:09.910 product was salapatica. The laxative mineral 00:07:09.910 --> 00:07:12.610 salt. The hugely popular one. Yeah. An effervescent 00:07:12.610 --> 00:07:15.990 drink. And then in 1901, they launched Ipana 00:07:15.990 --> 00:07:17.910 toothpaste, which became a household name for 00:07:17.910 --> 00:07:20.290 decades. So these are consumer products. This 00:07:20.290 --> 00:07:23.509 is a business built on advertising mass production. 00:07:24.089 --> 00:07:26.550 It's a totally different world from Squibb's 00:07:26.550 --> 00:07:28.529 Labs. Completely different. And we should say. 00:07:29.069 --> 00:07:31.870 For clarity, both of those brands, Salopatica 00:07:31.870 --> 00:07:34.329 and Iapano, they were eventually sold off or 00:07:34.329 --> 00:07:36.129 discontinued. But Bristol -Myers didn't stop 00:07:36.129 --> 00:07:38.610 there. They went on this huge diversification 00:07:38.610 --> 00:07:41.149 spree. Aggressively. Yeah. This is when they 00:07:41.149 --> 00:07:44.029 become the diversified giant we remember. They 00:07:44.029 --> 00:07:46.769 bought Clairol. Hair coloring. Dominant in the 00:07:46.769 --> 00:07:49.110 market. And then they bought the Drackett Company. 00:07:49.550 --> 00:07:52.810 And that portfolio included Windex and Drano. 00:07:53.129 --> 00:07:54.649 You really have to pause there for a second. 00:07:54.709 --> 00:07:57.870 The company that today is pioneering CAR -RT 00:07:57.870 --> 00:08:01.790 cell therapy once owned Drano. It's a huge conceptual 00:08:01.790 --> 00:08:04.129 leap. I mean, imagine the corporate meetings. 00:08:04.189 --> 00:08:06.750 You have one team presenting clinical trial data 00:08:06.750 --> 00:08:10.110 for a complex biologic that costs thousands of 00:08:10.110 --> 00:08:12.129 dollars a dose. And the next team is presenting 00:08:12.129 --> 00:08:14.790 a new bottle design for Windex. It's two different 00:08:14.790 --> 00:08:17.350 industrial universes under one roof. And yet 00:08:17.350 --> 00:08:19.790 history forces both of these companies, these 00:08:19.790 --> 00:08:22.529 two very different cultures. back onto the same 00:08:22.529 --> 00:08:25.430 track during World War II. The race for penicillin. 00:08:25.430 --> 00:08:27.829 Both of them mobilized for the Allied war effort. 00:08:28.529 --> 00:08:31.149 Squibb built what was then the world's largest 00:08:31.149 --> 00:08:33.669 penicillin plant in New Brunswick, New Jersey 00:08:33.669 --> 00:08:37.789 in 1944. A huge contribution. But the Bristol 00:08:37.789 --> 00:08:40.309 -Myers story is maybe even more amazing. They 00:08:40.309 --> 00:08:42.649 bought a company called Sheplin Biological Laboratories 00:08:42.649 --> 00:08:45.350 in Syracuse, New York. And Sheplin's main product 00:08:45.350 --> 00:08:48.740 was acidophilus milk. Like... A probiotic dairy 00:08:48.740 --> 00:08:51.539 drink. And they turned a milk factory. Into a 00:08:51.539 --> 00:08:53.559 state -of -the -art penicillin production facility 00:08:53.559 --> 00:08:56.320 for the Allied forces. They renamed it Bristol 00:08:56.320 --> 00:08:59.000 Laboratories in 45. It's this perfect example 00:08:59.000 --> 00:09:01.320 of wartime innovation. And that conversion really 00:09:01.320 --> 00:09:04.620 launches Bristol -Myers as a major player in 00:09:04.620 --> 00:09:06.419 the modern pharmaceutical space, right alongside 00:09:06.419 --> 00:09:08.759 Squibb. It does. Though there's a little bit 00:09:08.759 --> 00:09:11.159 of foreshadowing here. That plant in Syracuse, 00:09:11.159 --> 00:09:14.419 it stopped making penicillin in 2005. Why? The 00:09:14.419 --> 00:09:16.299 economics just didn't work anymore. It became 00:09:16.299 --> 00:09:19.080 cheaper to manufacture it overseas. The age of 00:09:19.080 --> 00:09:21.820 high volume, low margin generics in the U .S. 00:09:21.820 --> 00:09:23.759 was already ending. A sign of things to come. 00:09:24.379 --> 00:09:28.139 And then finally, in 1989, these two parallel 00:09:28.139 --> 00:09:31.480 stories merge. Briscoe Myers and Squibb become 00:09:31.480 --> 00:09:34.659 one, creating this diversified giant that would 00:09:34.659 --> 00:09:37.120 spend the next 20 years trying to figure out 00:09:37.120 --> 00:09:40.059 its own identity. So the 1989 merger creates 00:09:40.059 --> 00:09:42.500 this huge company, but it wasn't a powerhouse 00:09:42.500 --> 00:09:46.470 yet. It was... Big, but unfocused. And the journey 00:09:46.470 --> 00:09:49.870 from just being big to becoming a specialty biopharma 00:09:49.870 --> 00:09:51.850 leader took a lot of work. But they were already 00:09:51.850 --> 00:09:53.929 getting recognized for their science, right? 00:09:53.990 --> 00:09:55.669 Even before they shed all the consumer stuff. 00:09:55.830 --> 00:09:59.230 I'm looking at this 1999 National Medal of Technology 00:09:59.230 --> 00:10:01.429 they got from President Clinton. Yeah, and the 00:10:01.429 --> 00:10:03.870 wording of that award is so telling. It wasn't 00:10:03.870 --> 00:10:06.190 just for making new drugs. It was for, and I'm 00:10:06.190 --> 00:10:08.769 quoting here, redefining the science of clinical 00:10:08.769 --> 00:10:11.539 study. Through groundbreaking and hugely complex 00:10:11.539 --> 00:10:13.720 clinical trials that are recognized models in 00:10:13.720 --> 00:10:15.679 the industry. Right. So the R &D excellence, 00:10:15.820 --> 00:10:18.000 that squib DNA, was already there. But it was 00:10:18.000 --> 00:10:20.019 kind of trapped inside this corporation that 00:10:20.019 --> 00:10:22.279 was also worried about the market share for Clarel 00:10:22.279 --> 00:10:24.860 Hair Dye. And by the early 2000s, it was becoming 00:10:24.860 --> 00:10:26.960 clear that that model just wasn't working anymore. 00:10:27.470 --> 00:10:30.049 It was inefficient. And that's when we see the 00:10:30.049 --> 00:10:31.909 big strategic turn. It really starts heating 00:10:31.909 --> 00:10:35.610 up around 2007 and goes through about 2011. This 00:10:35.610 --> 00:10:37.789 is the moment they decide to blow up the old 00:10:37.789 --> 00:10:41.110 model. And transform from this sprawling, diversified 00:10:41.110 --> 00:10:44.070 company back into something much leaner, a specialty 00:10:44.070 --> 00:10:47.269 biopharma company focused on biologics. And this 00:10:47.269 --> 00:10:49.750 wasn't just, you know, a memo from the CEO. This 00:10:49.750 --> 00:10:53.110 was a massive, painful, multi -year overhaul. 00:10:53.230 --> 00:10:56.580 We're talking... ongoing layoffs, serious cost 00:10:56.580 --> 00:10:58.860 cutting. And the most dramatic part, they closed 00:10:58.860 --> 00:11:01.080 half of their manufacturing plants around the 00:11:01.080 --> 00:11:03.039 world. Half of them. Can you imagine the logistics 00:11:03.039 --> 00:11:05.700 of that? Decommissioning factories, dealing with 00:11:05.700 --> 00:11:08.600 unions, the local impact. It was a clear signal 00:11:08.600 --> 00:11:11.100 that they were done with the old high volume, 00:11:11.159 --> 00:11:13.299 low margin business. They were going all in on 00:11:13.299 --> 00:11:15.840 high value, complex medicines. It's a huge bet. 00:11:15.960 --> 00:11:18.220 And the person credited with leading that transformation 00:11:18.220 --> 00:11:20.759 was Lou Schmuckler, who came in to run global 00:11:20.759 --> 00:11:22.799 product development. He was. It was a massive 00:11:22.799 --> 00:11:25.169 undertaking. Yeah. But it paid off. By 2013, 00:11:25.529 --> 00:11:27.950 Forbes magazine named them the best drug company 00:11:27.950 --> 00:11:30.370 of the year. So the painful cuts were working. 00:11:30.470 --> 00:11:33.009 It was focusing their resources where it mattered 00:11:33.009 --> 00:11:35.970 most on their blockbuster drug portfolio. Let's 00:11:35.970 --> 00:11:37.830 get into that portfolio because this is what 00:11:37.830 --> 00:11:40.750 defines the modern BMS. You have to start with 00:11:40.750 --> 00:11:43.049 the cancer immunotherapies, especially Optivo. 00:11:43.190 --> 00:11:46.110 Right, Novolumomab. That's 19 % of their revenue 00:11:46.110 --> 00:11:47.909 right there. And it represents this complete 00:11:47.909 --> 00:11:50.269 revolution in how we think about treating cancer. 00:11:53.880 --> 00:11:56.580 death receptor blocking antibody. Okay, let's 00:11:56.580 --> 00:11:58.480 break that down for the learner. That's a mouthful. 00:11:58.600 --> 00:12:01.840 It is. So think of it this way. Your immune system's 00:12:01.840 --> 00:12:04.899 T cells are trying to attack a tumor, but the 00:12:04.899 --> 00:12:07.440 tumor is smart. It puts up a shield, basically. 00:12:07.620 --> 00:12:10.360 It tells the T cells to stand down. It hits the 00:12:10.360 --> 00:12:12.779 brakes on the immune system using a pathway called 00:12:12.779 --> 00:12:15.889 PD -1. So Abdiyava's job is to... What released 00:12:15.889 --> 00:12:18.190 the break. Exactly. It blocks that stand down 00:12:18.190 --> 00:12:20.490 signal. And suddenly your own immune system is 00:12:20.490 --> 00:12:22.690 unleashed to recognize and attack the cancer 00:12:22.690 --> 00:12:24.889 cells. It's a total game changer compared to 00:12:24.889 --> 00:12:26.750 old school chemotherapy. And it's often used 00:12:26.750 --> 00:12:28.909 with our other big immunotherapy drug, Yervoy. 00:12:29.029 --> 00:12:31.669 Right. Ipilimumab. That's another 5 % of revenue. 00:12:32.110 --> 00:12:34.649 Together, those two drugs are the foundation 00:12:34.649 --> 00:12:37.509 of their whole oncology strategy. Okay. But moving 00:12:37.509 --> 00:12:40.450 away from cancer. What really pays the bills, 00:12:40.529 --> 00:12:43.230 what stabilizes the whole company is Eliquis. 00:12:43.470 --> 00:12:45.250 The revenue ballast, that's a good way to put 00:12:45.250 --> 00:12:48.309 it. It's their blood thinner, Apixban, co -marketed 00:12:48.309 --> 00:12:52.389 with Pfizer. And it is by far their biggest product, 00:12:52.590 --> 00:12:55.409 28 % of all revenue. It gives them that steady 00:12:55.409 --> 00:12:58.409 income from a huge chronic care market, which 00:12:58.409 --> 00:13:01.490 lets them take these big risky bets in oncology. 00:13:01.690 --> 00:13:04.029 Precisely. And then the third pillar is hematology, 00:13:04.169 --> 00:13:07.070 specifically treatments for multiple myeloma. 00:13:07.190 --> 00:13:09.639 The blood to cancer. Yeah. And here they are 00:13:09.639 --> 00:13:12.279 just dominant. Revlimid brings in 12 % of revenue 00:13:12.279 --> 00:13:15.840 and Pomalyst adds another 8%. These drugs have 00:13:15.840 --> 00:13:18.360 turned what was once a very quick fatal diagnosis 00:13:18.360 --> 00:13:20.919 into a manageable chronic condition for a lot 00:13:20.919 --> 00:13:22.759 of patients. It all just paints this picture 00:13:22.759 --> 00:13:25.440 of extreme specialization. But before we get 00:13:25.440 --> 00:13:27.299 to the acquisitions, we should touch on one historical 00:13:27.299 --> 00:13:29.220 product that kind of sums up their whole journey, 00:13:29.799 --> 00:13:32.730 Taxel. Taxel is a great story. It's a famous 00:13:32.730 --> 00:13:35.090 chemo drug, but where it came from originally 00:13:35.090 --> 00:13:38.830 is wild. BMS had the only contract to harvest 00:13:38.830 --> 00:13:41.409 the bark of the endangered Pacific yew tree to 00:13:41.409 --> 00:13:43.350 make it. So they were literally relying on a 00:13:43.350 --> 00:13:46.470 limited endangered natural resource to produce 00:13:46.470 --> 00:13:49.269 a cancer drug. They were, which was obviously 00:13:49.269 --> 00:13:52.129 a huge environmental controversy. Now, of course, 00:13:52.149 --> 00:13:54.559 science has moved on. We can make Paclitaxel 00:13:54.559 --> 00:13:56.980 from renewable sources. And the patent is long 00:13:56.980 --> 00:13:59.379 gone. There are generics everywhere. Which is 00:13:59.379 --> 00:14:01.500 the perfect illustration of the problem they 00:14:01.500 --> 00:14:03.799 faced. Even your biggest blockbusters eventually 00:14:03.799 --> 00:14:07.100 expire. Success is temporary. It is. And that 00:14:07.100 --> 00:14:09.320 constant pressure to find the next Taxel, the 00:14:09.320 --> 00:14:11.779 next Updevo, is what drove them into the next 00:14:11.779 --> 00:14:14.360 phase of their strategy, buying innovation at 00:14:14.360 --> 00:14:17.389 any cost. So this specialty biopharma model is 00:14:17.389 --> 00:14:20.470 working, but it's hungry. It constantly needs 00:14:20.470 --> 00:14:22.690 new drugs in the pipeline to replace the ones 00:14:22.690 --> 00:14:24.769 whose patents are expiring. It's a treadmill. 00:14:24.970 --> 00:14:27.970 And they realized that their internal R &D, as 00:14:27.970 --> 00:14:30.149 good as it was, just couldn't move fast enough 00:14:30.149 --> 00:14:32.649 to fill all the gaps. So they formalized this 00:14:32.649 --> 00:14:34.850 strategy they called the string of pearls. Which 00:14:34.850 --> 00:14:37.590 is basically what? It's using everything, alliances, 00:14:37.970 --> 00:14:40.789 partnerships, and most importantly acquisitions, 00:14:40.830 --> 00:14:44.450 to just constantly add new. promising assets, 00:14:44.690 --> 00:14:47.909 the pearls to their pipeline. And this really 00:14:47.909 --> 00:14:51.029 kicks into high gear right as that big strategic 00:14:51.029 --> 00:14:54.289 shift is happening. Like in 2009, they buy Mederex, 00:14:54.409 --> 00:14:57.950 a biotech firm, for $2 .4 billion. And that same 00:14:57.950 --> 00:15:01.110 year, they make the big symbolic move. They get 00:15:01.110 --> 00:15:03.440 rid of Mead Johnson Nutrition. The baby formula 00:15:03.440 --> 00:15:05.899 business. Right. The last big piece of their 00:15:05.899 --> 00:15:08.539 consumer past. And they were very explicit about 00:15:08.539 --> 00:15:11.320 why. The official reason was to further sharpen 00:15:11.320 --> 00:15:13.460 the company's focus on biopharmaceuticals. Yeah. 00:15:13.539 --> 00:15:15.419 They were cashing out their history to fund their 00:15:15.419 --> 00:15:17.480 future. And the acquisitions just keep coming. 00:15:17.929 --> 00:15:20.990 In 2012, they spent $2 .5 billion on a company 00:15:20.990 --> 00:15:23.629 called Inhibitex. Yeah, that was their big push 00:15:23.629 --> 00:15:26.389 into hepatitis C drugs. It didn't quite become 00:15:26.389 --> 00:15:28.690 the blockbuster they hoped for, but it showed 00:15:28.690 --> 00:15:30.710 they were willing to spend to enter a hot market. 00:15:30.909 --> 00:15:33.289 And that same year, they partnered with AstraZeneca 00:15:33.289 --> 00:15:36.669 to buy Amelin Pharmaceuticals for over $5 billion. 00:15:37.830 --> 00:15:40.549 This is a play in the diabetes space. They eventually 00:15:40.549 --> 00:15:43.009 sold their share to AstraZeneca. But again, it 00:15:43.009 --> 00:15:44.769 just shows how aggressively they were hunting 00:15:44.769 --> 00:15:47.919 for opportunities in every major therapy. But 00:15:47.919 --> 00:15:51.039 all of those deals, they're like appetizers. 00:15:51.159 --> 00:15:53.679 They're nothing compared to the main course that 00:15:53.679 --> 00:15:56.419 fundamentally remade the company in 2019. The 00:15:56.419 --> 00:15:59.059 Celgene mega deal. This wasn't just a big acquisition. 00:15:59.220 --> 00:16:01.940 It was a move born of, I would say, strategic 00:16:01.940 --> 00:16:04.500 desperation. So what was the emergency? Why did 00:16:04.500 --> 00:16:06.980 they feel they had to do this massive deal right 00:16:06.980 --> 00:16:10.539 then? The emergency had a name. Keytruda. Merck's 00:16:10.539 --> 00:16:14.000 drug. The competitor to Optivo. Exactly. The 00:16:14.000 --> 00:16:16.259 sources are clear that Optivo sales were starting 00:16:16.259 --> 00:16:19.320 to fall behind Keytruda. Their star drug was 00:16:19.320 --> 00:16:22.080 facing a serious threat. That creates a massive 00:16:22.080 --> 00:16:25.539 future revenue hole. And Celgene, with its absolute 00:16:25.539 --> 00:16:28.120 dominance in hematology with Revlimid and Pomalyst, 00:16:28.279 --> 00:16:30.200 was the only thing big enough on the market to 00:16:30.200 --> 00:16:32.769 plug that hole. Fast. So what was the price tag 00:16:32.769 --> 00:16:35.590 on this strategic rescue mission? The headline 00:16:35.590 --> 00:16:39.870 number was $74 billion. Wow. But once you include 00:16:39.870 --> 00:16:41.990 all the debt they had to take on, it was actually 00:16:41.990 --> 00:16:46.450 closer to $95 billion. $95 billion. That's an 00:16:46.450 --> 00:16:48.409 astronomical sum. I'm not surprised there was 00:16:48.409 --> 00:16:51.710 pushback. Oh, major pushback. Big investors like 00:16:51.710 --> 00:16:54.289 Wellington Management and Starbrew Value, they 00:16:54.289 --> 00:16:56.870 publicly campaigned against the deal. They thought 00:16:56.870 --> 00:16:59.379 the price was way too high. But it went through 00:16:59.379 --> 00:17:02.299 anyway. It did. 75 % of shareholders approved 00:17:02.299 --> 00:17:05.119 it in the end. They saw the threat from Merck 00:17:05.119 --> 00:17:08.460 and decided this was the only way out. And even 00:17:08.460 --> 00:17:10.619 then, to get it approved by regulators, they 00:17:10.619 --> 00:17:13.440 had to sell off a piece of Celgene. Right. Regulators 00:17:13.440 --> 00:17:15.960 were worried they'd have a monopoly in immunology. 00:17:16.119 --> 00:17:19.059 So Amgen came in and bought Celgene's psoriasis 00:17:19.059 --> 00:17:24.680 drug, Otezla, for $13 .4 billion. a massive deal 00:17:24.680 --> 00:17:26.660 just to clear the way for the even bigger deal. 00:17:26.799 --> 00:17:29.319 You'd think after spending $95 billion they might 00:17:29.319 --> 00:17:31.740 take a break. They did the opposite. It seems 00:17:31.740 --> 00:17:33.579 like the Celgene deal just proved to them that 00:17:33.579 --> 00:17:35.480 buying was the only way to grow, so they went 00:17:35.480 --> 00:17:37.619 on another targeted spending spree. Starting 00:17:37.619 --> 00:17:40.940 with cardiology in 2020, they bought myocardia. 00:17:40.960 --> 00:17:46.220 For $13 .1 billion, all to get one drug, Mavacamtin, 00:17:46.319 --> 00:17:49.539 which is now called Camzeos, a specialized drug 00:17:49.539 --> 00:17:51.970 for a specific heart condition. Then they pivot 00:17:51.970 --> 00:17:55.309 right back to cancer. Precision oncology. In 00:17:55.309 --> 00:17:58.049 2022, they buy Turning Point Therapeutics for 00:17:58.049 --> 00:18:01.910 $4 .1 billion. Then at the start of 2024, Mirati 00:18:01.910 --> 00:18:05.089 Therapeutics for another $4 .8 billion, just 00:18:05.089 --> 00:18:07.970 constantly adding these small, highly specialized 00:18:07.970 --> 00:18:10.250 cancer companies. But the most surprising move, 00:18:10.349 --> 00:18:12.930 I think, was the Karuna Therapeutics deal. The 00:18:12.930 --> 00:18:15.970 neuroscience play. This was a huge bet. $14 billion 00:18:15.970 --> 00:18:19.990 in March 2024. For an investigational antipsychotic 00:18:19.990 --> 00:18:22.849 drug. Right. CAR -XT. Yeah. But that bet paid 00:18:22.849 --> 00:18:25.170 off, and it paid off fast. Just a few months 00:18:25.170 --> 00:18:28.569 later, in September 2024, the FDA approved it. 00:18:28.920 --> 00:18:31.420 It's now called COVID -5. And the sources highlight 00:18:31.420 --> 00:18:34.039 that this is the first novel type of treatment 00:18:34.039 --> 00:18:37.359 for schizophrenia in 70 years. 70 years. I mean, 00:18:37.359 --> 00:18:38.980 if you can do that, if you can break a seven 00:18:38.980 --> 00:18:41.039 -decade stalemate in treating a major psychiatric 00:18:41.039 --> 00:18:44.660 illness, that $14 billion price tag suddenly 00:18:44.660 --> 00:18:46.380 starts to look like a bargain. It's the definition 00:18:46.380 --> 00:18:49.440 of high risk, high reward. It is. And they weren't 00:18:49.440 --> 00:18:51.920 done. Early 2024, they also bought Razor Bio 00:18:51.920 --> 00:18:54.779 for about $4 billion, getting them into radiopharmaceuticals. 00:18:54.799 --> 00:18:57.890 So using radiation to target cancer cells? Exactly. 00:18:57.970 --> 00:18:59.390 They're not just buying drugs. They're buying 00:18:59.390 --> 00:19:02.109 entire technology platforms for the future. It's 00:19:02.109 --> 00:19:04.289 an incredible strategy. But as we saw with that 00:19:04.289 --> 00:19:07.750 $9 billion loss, it is incredibly expensive. 00:19:08.170 --> 00:19:11.809 So while BMS is pulling off this incredible scientific 00:19:11.809 --> 00:19:14.930 and strategic turnaround, the company's reputation 00:19:14.930 --> 00:19:17.869 took some major hits, especially in the early 00:19:17.869 --> 00:19:21.269 2000s. There were these significant... legal 00:19:21.269 --> 00:19:23.730 and ethical scandals. Yeah, that period around 00:19:23.730 --> 00:19:26.710 2002 was really a low point for them. It started 00:19:26.710 --> 00:19:29.450 with lawsuits from I think it was 29 different 00:19:29.450 --> 00:19:32.190 U .S. states accusing them of illegal monopoly 00:19:32.190 --> 00:19:34.289 behavior. What were they actually accused of 00:19:34.289 --> 00:19:37.029 doing? Two main things. First, they were allegedly 00:19:37.029 --> 00:19:39.250 using sham patents to try and keep a generic 00:19:39.250 --> 00:19:42.789 version of their anxiety drug bus bar off the 00:19:42.789 --> 00:19:45.049 market. So trying to extend their exclusive sales 00:19:45.049 --> 00:19:47.140 period. Right. And they were accused of doing 00:19:47.140 --> 00:19:48.779 the same thing with their blockbuster cancer 00:19:48.779 --> 00:19:51.619 drug, Taxol. Just trying to protect those revenue 00:19:51.619 --> 00:19:53.839 streams for as long as possible, even if it meant 00:19:53.839 --> 00:19:55.700 breaking the rules. And that ended up costing 00:19:55.700 --> 00:19:58.900 them. A lot. They settled all those cases for 00:19:58.900 --> 00:20:02.420 $670 million. It was a huge financial penalty 00:20:02.420 --> 00:20:05.079 and a major black eye for their reputation. But 00:20:05.079 --> 00:20:07.000 that wasn't even the biggest scandal that year, 00:20:07.059 --> 00:20:09.480 was it? No, the really damaging one was the accounting 00:20:09.480 --> 00:20:12.599 scandal. It was a practice called channel stuffing. 00:20:13.109 --> 00:20:15.049 OK, can you explain what that actually means? 00:20:15.170 --> 00:20:17.710 It sounds bad. It is bad. It's fundamentally 00:20:17.710 --> 00:20:20.589 deceptive. What they were doing was offering 00:20:20.589 --> 00:20:23.190 massive discounts to their distributors to get 00:20:23.190 --> 00:20:25.250 them to buy way more product than they actually 00:20:25.250 --> 00:20:27.529 needed. So they were flooding the channel with 00:20:27.529 --> 00:20:30.390 inventory. Exactly. And then, and this is the 00:20:30.390 --> 00:20:32.589 fraudulent part, they were booking all of those 00:20:32.589 --> 00:20:35.400 sales as immediate revenue. They were basically 00:20:35.400 --> 00:20:38.279 reporting sales for drugs that were just sitting 00:20:38.279 --> 00:20:41.119 in a warehouse, not being sold to patients. So 00:20:41.119 --> 00:20:42.940 it made their sales numbers look much better 00:20:42.940 --> 00:20:45.559 than they actually were. Much better. It completely 00:20:45.559 --> 00:20:48.059 misled investors about the health of the company. 00:20:48.180 --> 00:20:50.960 And the fallout was severe. They had to restate 00:20:50.960 --> 00:20:53.220 their earnings for, what, three years? From 1999 00:20:53.220 --> 00:20:56.220 to 2001, yeah. And they settled with the Department 00:20:56.220 --> 00:20:59.759 of Justice and the SEC for $150 million. But 00:20:59.759 --> 00:21:02.309 it went beyond fines, didn't it? It did. The 00:21:02.309 --> 00:21:04.369 company was forced to have a court -appointed 00:21:04.369 --> 00:21:07.650 monitor, basically an outside watchdog, to oversee 00:21:07.650 --> 00:21:10.430 their behavior. And some of their top executives, 00:21:10.670 --> 00:21:13.410 the head of the SARMA group and the CFO, were 00:21:13.410 --> 00:21:15.609 actually indicted on federal securities charges. 00:21:15.990 --> 00:21:18.089 Wow. So that's a crisis that goes right to the 00:21:18.089 --> 00:21:20.569 top. You can really see how a scandal like that 00:21:20.569 --> 00:21:23.329 would force the kind of radical strategic change 00:21:23.329 --> 00:21:26.630 we saw starting in 2007. You had to. It was an 00:21:26.630 --> 00:21:28.380 existential threat. And we should also briefly 00:21:28.380 --> 00:21:30.660 mention there was this other historical lawsuit 00:21:30.660 --> 00:21:33.019 they were involved in related to the Guatemala 00:21:33.019 --> 00:21:35.500 syphilis experiment. Right. A truly awful chapter 00:21:35.500 --> 00:21:38.359 in medical history. BMS was named as a defendant, 00:21:38.519 --> 00:21:41.039 but the source material notes they were officially 00:21:41.039 --> 00:21:44.420 dismissed from that lawsuit in 2022. Okay, so 00:21:44.420 --> 00:21:46.359 let's shift to how they manage their influence 00:21:46.359 --> 00:21:49.299 today. Because with 71 % of their revenue coming 00:21:49.299 --> 00:21:51.539 from the U .S., they have to be active in Washington. 00:21:51.900 --> 00:21:54.160 Oh, they are very active. They spend between 00:21:54.160 --> 00:21:58.079 $5 and $10 million every single year on lobbying 00:21:58.079 --> 00:22:00.240 in the U .S. And that's just their direct spending, 00:22:00.359 --> 00:22:01.960 right? That's just what they spend directly. 00:22:02.779 --> 00:22:05.539 They also contribute huge amounts to industry 00:22:05.539 --> 00:22:09.519 groups like PHRMA, the main drug lobby, and BioTanada 00:22:09.519 --> 00:22:11.599 to make sure the industry's collective voice 00:22:11.599 --> 00:22:13.500 is heard on issues like patents and pricing. 00:22:13.869 --> 00:22:16.190 So it's a significant political operation, but 00:22:16.190 --> 00:22:18.509 let's balance that with their global research 00:22:18.509 --> 00:22:20.289 and philanthropic footprint. They're not just 00:22:20.289 --> 00:22:22.890 based in New Jersey. Not at all. Their R &D network 00:22:22.890 --> 00:22:25.470 is global. They have major sites in California, 00:22:25.690 --> 00:22:28.769 Spain, Japan, multiple sites in India, the UK. 00:22:29.210 --> 00:22:31.589 They're pulling talent from all over the world 00:22:31.589 --> 00:22:33.910 to fuel that pipeline. And they fund a lot of 00:22:33.910 --> 00:22:35.809 external science and health organizations, too. 00:22:35.930 --> 00:22:38.549 A huge range. Everything from, you know, fundamental 00:22:38.549 --> 00:22:40.349 research at the Institute for Advanced Study 00:22:40.349 --> 00:22:43.829 to major hospitals in Canada like SickKids and 00:22:43.829 --> 00:22:46.210 the Princess Margaret Cancer Center. They even 00:22:46.210 --> 00:22:48.170 fund the National Geographic Society. It's a 00:22:48.170 --> 00:22:50.950 very strategic way of supporting the entire ecosystem 00:22:50.950 --> 00:22:54.089 that they depend on. It is. of success from that 00:22:54.089 --> 00:22:56.670 ecosystem, let's just spotlight one current drug 00:22:56.670 --> 00:22:59.049 that's really showing the promise of their new 00:22:59.049 --> 00:23:02.809 model. Luspatercept or Reblizol. Right. This 00:23:02.809 --> 00:23:05.630 is for anemia related to MDS, a type of blood 00:23:05.630 --> 00:23:09.269 disorder. Exactly. Patients with MDS often need 00:23:09.269 --> 00:23:12.509 constant draining blood transfusions. And in 00:23:12.509 --> 00:23:15.420 a big phase three study, Reblazil proved it was 00:23:15.420 --> 00:23:17.420 better than the older treatments. And that led 00:23:17.420 --> 00:23:21.420 to a big FDA approval in 2023. A huge one. It 00:23:21.420 --> 00:23:24.000 made Reblazil a first -line treatment for a big 00:23:24.000 --> 00:23:26.279 group of these patients. That means it's now 00:23:26.279 --> 00:23:28.660 the go -to drug, not something you try after 00:23:28.660 --> 00:23:30.640 other things have failed. And the company has 00:23:30.640 --> 00:23:32.819 some pretty big expectations for it financially. 00:23:33.259 --> 00:23:35.700 They do. Their internal goal is for Reblazil 00:23:35.700 --> 00:23:38.920 to be bringing in $4 billion a year in sales 00:23:38.920 --> 00:23:42.000 by 2030. And that's exactly the kind of home 00:23:42.000 --> 00:23:44.380 run they need to pay for all those massive acquisitions. 00:23:44.460 --> 00:23:46.240 So when you step back and look at the whole story, 00:23:46.359 --> 00:23:48.839 it's just it's an incredible journey. It really 00:23:48.839 --> 00:23:51.339 is. What started as these two totally separate 00:23:51.339 --> 00:23:54.039 companies in the 1800s, one obsessed with scientific 00:23:54.039 --> 00:23:56.420 purity, the other selling toothpaste and Windex. 00:23:56.539 --> 00:23:58.460 Has now merged, gone through this incredibly 00:23:58.460 --> 00:24:01.220 painful process of shedding its entire consumer 00:24:01.220 --> 00:24:04.240 identity, survived these massive scandals. And 00:24:04.240 --> 00:24:06.920 completely reinvented itself. The Bristol -Myers 00:24:06.920 --> 00:24:09.700 Squibb of today is this laser -focused global 00:24:09.700 --> 00:24:13.019 biopharma machine. It's all about immunotherapy, 00:24:13.299 --> 00:24:17.619 hematology, and now neuroscience. The whole story 00:24:17.619 --> 00:24:19.619 is really a perfect case study of how big pharma 00:24:19.619 --> 00:24:22.960 works, right? Controversy and competition force 00:24:22.960 --> 00:24:24.960 you to change. That change leads to blockbuster 00:24:24.960 --> 00:24:27.980 drugs. And then you have to spend billions and 00:24:27.980 --> 00:24:30.220 billions to find the next blockbuster before 00:24:30.220 --> 00:24:33.200 the old one dies. It's a cycle, a very expensive 00:24:33.200 --> 00:24:35.619 cycle. And that brings us right back to where 00:24:35.619 --> 00:24:38.900 we started with that $9 billion loss in 2024. 00:24:39.359 --> 00:24:41.980 All of this activity, the buy to grow engine, 00:24:42.059 --> 00:24:44.180 as you called it, it's incredibly high stakes. 00:24:44.319 --> 00:24:46.880 It is. I mean, you add it all up. So Gene, Karuna, 00:24:46.980 --> 00:24:49.960 Myocardia, Razobio, they've bet close to $100 00:24:49.960 --> 00:24:52.539 billion in just the last five or six years on 00:24:52.539 --> 00:24:54.799 buying future revenue. Their whole model depends 00:24:54.799 --> 00:24:57.180 on these massive high -risk acquisitions to keep 00:24:57.180 --> 00:24:58.980 the pipeline full. And that leaves us with a 00:24:58.980 --> 00:25:01.119 final, really important question for you, the 00:25:01.119 --> 00:25:03.200 learner, to think about. It's not just about 00:25:03.200 --> 00:25:06.059 BMS. It's about the whole industry. How sustainable 00:25:06.059 --> 00:25:09.339 is this model? This constant need to spend tens 00:25:09.339 --> 00:25:12.059 of billions just to stay in the game? Exactly. 00:25:12.099 --> 00:25:14.400 And what happens to the whole system if one of 00:25:14.400 --> 00:25:17.240 these huge, multi -billion dollar bets doesn't 00:25:17.240 --> 00:25:19.900 pay off? What if the new schizophrenia drug, 00:25:20.079 --> 00:25:23.609 Covinfy, doesn't meet those sky -high sales expectations, 00:25:23.910 --> 00:25:27.329 or if the radiopharmaceutical platform doesn't 00:25:27.329 --> 00:25:29.869 deliver. That negative net income is the price 00:25:29.869 --> 00:25:32.029 of making those bets. It's the cost of playing 00:25:32.029 --> 00:25:34.650 the game at this level. It is. And it's a powerful 00:25:34.650 --> 00:25:37.269 reminder that in the world of specialty biopharma, 00:25:37.390 --> 00:25:39.430 the risks you have to take just keep getting 00:25:39.430 --> 00:25:40.309 bigger and bigger.