Welcome back to The Deep Dive. Where we go beyond
the summary and get into the real story behind
the sources. And today we are tackling a giant,
an absolute behemoth of the pharmaceutical world,
Bristol -Myers Squibb. Yeah. And if you only
know BMS from their modern reputation, you know,
these incredible cancer drugs, you're really
only seeing the tip of the iceberg. That's exactly
it. That's the challenge for you today because
the company that makes these breakthrough immunotherapies
like Opdivo or that essential blood thinner Eliquis,
their history is completely split. One half of
it involves selling things like salhepatica,
which is this popular laxative, and you won't
believe it, Windex. Windex, from window cleaner
to, you know, life -saving cancer drugs. That
journey is what this is all about. Okay, let's
get into it. Our mission today is to trace that
exact path. We're starting with these separate
19th century apothecaries. We're going through
world wars, a huge painful pivot away from consumer
goods, and some of the most staggering acquisitions
in pharma history. And some pretty major controversies
along the way, too. Oh, definitely. All to understand
how they became this global biopharma leader
we see today. And we really need to get a handle
on the scale here. This isn't just a big company.
It's a central pillar of the U .S. economy. It's
what, 94th on the Fortune 500 list? 94th. And
the numbers for 2024, they really tell the story
of a company taking massive risks for massive
rewards. So let's set the stage with those metrics.
OK, so you're looking at a company that brought
in 48 point. $3 billion in revenue. That's billion
with a B. Huge number. They have 34 ,100 employees
all over the world, but the heart of the company
is still very much in New Jersey, Princeton,
and Lawrenceville. Right. But here's the number
from the source material that just jumps off
the page. It really sets up our whole conversation.
It absolutely does. Let's just drop it. Go for
it. Despite that $48 billion in revenue, in 2024,
Bristol -Myers Squibb reported a negative net
income. A loss. A big loss. A loss of $8 .9 billion.
Wait, say that again. They made $48 billion but
lost almost $9 billion. Lost it. And an operating
loss of $8 .4 billion. That is not a small discrepancy.
No, that's a colossal financial signal. It tells
you everything about their strategy. It really
does. That $9 billion loss is, well, it's the
price of admission for staying competitive in
this decade. It tells you, the learner, that
BMS is all in. on acquiring their future pipeline.
They're spending today's money to buy tomorrow's
revenue. So they're basically sacrificing short
-term profit for long -term survival. That's
the new reality in big pharma. You spend tens
of billions on acquisitions or you let the patent
cliffs just swallow you whole. Okay, that context
is critical for everything we're about to talk
about. But first, let's look at the drugs that
are actually generating the cash that lets them
make these huge bets. Record revenue anchors.
And their portfolio is very concentrated in a
few key areas. Leading the pack is Eliquis or
Apixaban. The blood thinner. The blood thinner,
yeah. They co -market it with Pfizer. And it
is their single biggest product. It brings in
28 % of their total 2024 revenue. Wow. So more
than a quarter of the entire company's income
rests on one cardiovascular drug. Exactly. And
right behind that, you've got their work in oncology
and hematology. This is where they're really
famous now. Mm -hmm. Opdivo. which is nivolumab,
that's the immunotherapy powerhouse, it drives
another 19 % of revenue. And then Revlimid or
lenalidomide for multiple myeloma, that's another
12%. So just those three drugs, that's almost
60 % of their entire business. That's a huge
dependency. It is. And here's the other piece
of the puzzle. Yeah. 71 % of all that revenue
comes from one country. The United States. The
United States. Yeah. So they are a global company.
but their sales are profoundly American -focused.
And that's going to be so important later when
we talk about lobbying and pricing pressure.
Absolutely. But to really get this, we have to
go back, way back, over 160 years to two very,
very different companies. Okay, let's start with
the Squibb side of the family tree. The older
half, and you could argue the more purely scientific
half. Right. The Squibb Corporation. It was founded
way back in 1858 by Edward Robinson Squibb. In
Brooklyn, of all places. And right from the beginning,
you can see the DNA of the modern company's focus
on, you know, quality and scientific rigor. That's
what makes Edward Squibb so fascinating. He was
this absolute crusader for quality control. I
mean, you have to remember, in the mid -1800s,
pharmacy was like the Wild West. Right. No standards.
No standards. Impure ingredients. You never really
know what you're getting. And Squibb was just,
he was outraged by it. That's why he founded
the company. And he didn't just complain. He
actually tried to change the system. The source
material says he went to the American Medical
Association, the AMA. And they basically blew
him off. He couldn't convince them to adopt his
incredibly high standards for purity. So he just
did it himself. He literally did. He self -published
his own guide, his own standard, called Squibb's
Ephemeris of Materia Medica, basically saying,
fine, if you don't do it, I'll create the standard
myself. That's incredible. He was relentless.
He published over 100 papers in the American
Journal of Pharmacy. He was a true foundational
scientist who just believed that the quality
of medicine was non -negotiable. And that belief,
that commitment, gets battle -tested almost right
away. By the American Civil War. The Squibb Corporation
becomes a major supplier of medical goods to
the Union Army. And this is what really cements
their reputation. I mean, think about the chaos
of the Civil War. Squibb provided these portable
medical kits. They were like mini pharmacies
for the battlefield. Containing what kind of
things? The essentials. We're talking reliable,
pure morphine for pain, surgical anesthetics
for amputations in the field, and crucially...
For malaria. For malaria, which was just devastating
the troops, especially in the South. Having a
reliable supply of quinine was a massive strategic
advantage. So that experience basically proved
their whole business model, that purity and reliability
matter most when the stakes are highest. It absolutely
did. And it flows right into their corporate
identity later on. When they incorporated in
1905, their logo was built on four pillars. Uniformity.
Purity, efficacy, and reliability based on research.
You can draw a straight line from that motto
right back to Edward Squibb's personal crusade.
A direct line. Okay, so that's Squibb. Science,
purity, military medicine. Now let's flip the
coin completely and look at Bristol Myers. They
get their start later, 1887, and the culture
could not be more different. It's the perfect
contrast, right? This company was founded by
two grads from Hamilton College. William McLaren
Bristol and John Ripley Myers. They bought a
small company in upstate New York called Clinton
Pharmaceutical. And where Squibb was all about
high purity compounds for doctors, Bristol Myers
went straight for the public. For the mass market.
This is where the whole Windex due to therapy
idea really comes from. Their first big national
product was salapatica. The laxative mineral
salt. The hugely popular one. Yeah. An effervescent
drink. And then in 1901, they launched Ipana
toothpaste, which became a household name for
decades. So these are consumer products. This
is a business built on advertising mass production.
It's a totally different world from Squibb's
Labs. Completely different. And we should say.
For clarity, both of those brands, Salopatica
and Iapano, they were eventually sold off or
discontinued. But Bristol -Myers didn't stop
there. They went on this huge diversification
spree. Aggressively. Yeah. This is when they
become the diversified giant we remember. They
bought Clairol. Hair coloring. Dominant in the
market. And then they bought the Drackett Company.
And that portfolio included Windex and Drano.
You really have to pause there for a second.
The company that today is pioneering CAR -RT
cell therapy once owned Drano. It's a huge conceptual
leap. I mean, imagine the corporate meetings.
You have one team presenting clinical trial data
for a complex biologic that costs thousands of
dollars a dose. And the next team is presenting
a new bottle design for Windex. It's two different
industrial universes under one roof. And yet
history forces both of these companies, these
two very different cultures. back onto the same
track during World War II. The race for penicillin.
Both of them mobilized for the Allied war effort.
Squibb built what was then the world's largest
penicillin plant in New Brunswick, New Jersey
in 1944. A huge contribution. But the Bristol
-Myers story is maybe even more amazing. They
bought a company called Sheplin Biological Laboratories
in Syracuse, New York. And Sheplin's main product
was acidophilus milk. Like... A probiotic dairy
drink. And they turned a milk factory. Into a
state -of -the -art penicillin production facility
for the Allied forces. They renamed it Bristol
Laboratories in 45. It's this perfect example
of wartime innovation. And that conversion really
launches Bristol -Myers as a major player in
the modern pharmaceutical space, right alongside
Squibb. It does. Though there's a little bit
of foreshadowing here. That plant in Syracuse,
it stopped making penicillin in 2005. Why? The
economics just didn't work anymore. It became
cheaper to manufacture it overseas. The age of
high volume, low margin generics in the U .S.
was already ending. A sign of things to come.
And then finally, in 1989, these two parallel
stories merge. Briscoe Myers and Squibb become
one, creating this diversified giant that would
spend the next 20 years trying to figure out
its own identity. So the 1989 merger creates
this huge company, but it wasn't a powerhouse
yet. It was... Big, but unfocused. And the journey
from just being big to becoming a specialty biopharma
leader took a lot of work. But they were already
getting recognized for their science, right?
Even before they shed all the consumer stuff.
I'm looking at this 1999 National Medal of Technology
they got from President Clinton. Yeah, and the
wording of that award is so telling. It wasn't
just for making new drugs. It was for, and I'm
quoting here, redefining the science of clinical
study. Through groundbreaking and hugely complex
clinical trials that are recognized models in
the industry. Right. So the R &D excellence,
that squib DNA, was already there. But it was
kind of trapped inside this corporation that
was also worried about the market share for Clarel
Hair Dye. And by the early 2000s, it was becoming
clear that that model just wasn't working anymore.
It was inefficient. And that's when we see the
big strategic turn. It really starts heating
up around 2007 and goes through about 2011. This
is the moment they decide to blow up the old
model. And transform from this sprawling, diversified
company back into something much leaner, a specialty
biopharma company focused on biologics. And this
wasn't just, you know, a memo from the CEO. This
was a massive, painful, multi -year overhaul.
We're talking... ongoing layoffs, serious cost
cutting. And the most dramatic part, they closed
half of their manufacturing plants around the
world. Half of them. Can you imagine the logistics
of that? Decommissioning factories, dealing with
unions, the local impact. It was a clear signal
that they were done with the old high volume,
low margin business. They were going all in on
high value, complex medicines. It's a huge bet.
And the person credited with leading that transformation
was Lou Schmuckler, who came in to run global
product development. He was. It was a massive
undertaking. Yeah. But it paid off. By 2013,
Forbes magazine named them the best drug company
of the year. So the painful cuts were working.
It was focusing their resources where it mattered
most on their blockbuster drug portfolio. Let's
get into that portfolio because this is what
defines the modern BMS. You have to start with
the cancer immunotherapies, especially Optivo.
Right, Novolumomab. That's 19 % of their revenue
right there. And it represents this complete
revolution in how we think about treating cancer.
death receptor blocking antibody. Okay, let's
break that down for the learner. That's a mouthful.
It is. So think of it this way. Your immune system's
T cells are trying to attack a tumor, but the
tumor is smart. It puts up a shield, basically.
It tells the T cells to stand down. It hits the
brakes on the immune system using a pathway called
PD -1. So Abdiyava's job is to... What released
the break. Exactly. It blocks that stand down
signal. And suddenly your own immune system is
unleashed to recognize and attack the cancer
cells. It's a total game changer compared to
old school chemotherapy. And it's often used
with our other big immunotherapy drug, Yervoy.
Right. Ipilimumab. That's another 5 % of revenue.
Together, those two drugs are the foundation
of their whole oncology strategy. Okay. But moving
away from cancer. What really pays the bills,
what stabilizes the whole company is Eliquis.
The revenue ballast, that's a good way to put
it. It's their blood thinner, Apixban, co -marketed
with Pfizer. And it is by far their biggest product,
28 % of all revenue. It gives them that steady
income from a huge chronic care market, which
lets them take these big risky bets in oncology.
Precisely. And then the third pillar is hematology,
specifically treatments for multiple myeloma.
The blood to cancer. Yeah. And here they are
just dominant. Revlimid brings in 12 % of revenue
and Pomalyst adds another 8%. These drugs have
turned what was once a very quick fatal diagnosis
into a manageable chronic condition for a lot
of patients. It all just paints this picture
of extreme specialization. But before we get
to the acquisitions, we should touch on one historical
product that kind of sums up their whole journey,
Taxel. Taxel is a great story. It's a famous
chemo drug, but where it came from originally
is wild. BMS had the only contract to harvest
the bark of the endangered Pacific yew tree to
make it. So they were literally relying on a
limited endangered natural resource to produce
a cancer drug. They were, which was obviously
a huge environmental controversy. Now, of course,
science has moved on. We can make Paclitaxel
from renewable sources. And the patent is long
gone. There are generics everywhere. Which is
the perfect illustration of the problem they
faced. Even your biggest blockbusters eventually
expire. Success is temporary. It is. And that
constant pressure to find the next Taxel, the
next Updevo, is what drove them into the next
phase of their strategy, buying innovation at
any cost. So this specialty biopharma model is
working, but it's hungry. It constantly needs
new drugs in the pipeline to replace the ones
whose patents are expiring. It's a treadmill.
And they realized that their internal R &D, as
good as it was, just couldn't move fast enough
to fill all the gaps. So they formalized this
strategy they called the string of pearls. Which
is basically what? It's using everything, alliances,
partnerships, and most importantly acquisitions,
to just constantly add new. promising assets,
the pearls to their pipeline. And this really
kicks into high gear right as that big strategic
shift is happening. Like in 2009, they buy Mederex,
a biotech firm, for $2 .4 billion. And that same
year, they make the big symbolic move. They get
rid of Mead Johnson Nutrition. The baby formula
business. Right. The last big piece of their
consumer past. And they were very explicit about
why. The official reason was to further sharpen
the company's focus on biopharmaceuticals. Yeah.
They were cashing out their history to fund their
future. And the acquisitions just keep coming.
In 2012, they spent $2 .5 billion on a company
called Inhibitex. Yeah, that was their big push
into hepatitis C drugs. It didn't quite become
the blockbuster they hoped for, but it showed
they were willing to spend to enter a hot market.
And that same year, they partnered with AstraZeneca
to buy Amelin Pharmaceuticals for over $5 billion.
This is a play in the diabetes space. They eventually
sold their share to AstraZeneca. But again, it
just shows how aggressively they were hunting
for opportunities in every major therapy. But
all of those deals, they're like appetizers.
They're nothing compared to the main course that
fundamentally remade the company in 2019. The
Celgene mega deal. This wasn't just a big acquisition.
It was a move born of, I would say, strategic
desperation. So what was the emergency? Why did
they feel they had to do this massive deal right
then? The emergency had a name. Keytruda. Merck's
drug. The competitor to Optivo. Exactly. The
sources are clear that Optivo sales were starting
to fall behind Keytruda. Their star drug was
facing a serious threat. That creates a massive
future revenue hole. And Celgene, with its absolute
dominance in hematology with Revlimid and Pomalyst,
was the only thing big enough on the market to
plug that hole. Fast. So what was the price tag
on this strategic rescue mission? The headline
number was $74 billion. Wow. But once you include
all the debt they had to take on, it was actually
closer to $95 billion. $95 billion. That's an
astronomical sum. I'm not surprised there was
pushback. Oh, major pushback. Big investors like
Wellington Management and Starbrew Value, they
publicly campaigned against the deal. They thought
the price was way too high. But it went through
anyway. It did. 75 % of shareholders approved
it in the end. They saw the threat from Merck
and decided this was the only way out. And even
then, to get it approved by regulators, they
had to sell off a piece of Celgene. Right. Regulators
were worried they'd have a monopoly in immunology.
So Amgen came in and bought Celgene's psoriasis
drug, Otezla, for $13 .4 billion. a massive deal
just to clear the way for the even bigger deal.
You'd think after spending $95 billion they might
take a break. They did the opposite. It seems
like the Celgene deal just proved to them that
buying was the only way to grow, so they went
on another targeted spending spree. Starting
with cardiology in 2020, they bought myocardia.
For $13 .1 billion, all to get one drug, Mavacamtin,
which is now called Camzeos, a specialized drug
for a specific heart condition. Then they pivot
right back to cancer. Precision oncology. In
2022, they buy Turning Point Therapeutics for
$4 .1 billion. Then at the start of 2024, Mirati
Therapeutics for another $4 .8 billion, just
constantly adding these small, highly specialized
cancer companies. But the most surprising move,
I think, was the Karuna Therapeutics deal. The
neuroscience play. This was a huge bet. $14 billion
in March 2024. For an investigational antipsychotic
drug. Right. CAR -XT. Yeah. But that bet paid
off, and it paid off fast. Just a few months
later, in September 2024, the FDA approved it.
It's now called COVID -5. And the sources highlight
that this is the first novel type of treatment
for schizophrenia in 70 years. 70 years. I mean,
if you can do that, if you can break a seven
-decade stalemate in treating a major psychiatric
illness, that $14 billion price tag suddenly
starts to look like a bargain. It's the definition
of high risk, high reward. It is. And they weren't
done. Early 2024, they also bought Razor Bio
for about $4 billion, getting them into radiopharmaceuticals.
So using radiation to target cancer cells? Exactly.
They're not just buying drugs. They're buying
entire technology platforms for the future. It's
an incredible strategy. But as we saw with that
$9 billion loss, it is incredibly expensive.
So while BMS is pulling off this incredible scientific
and strategic turnaround, the company's reputation
took some major hits, especially in the early
2000s. There were these significant... legal
and ethical scandals. Yeah, that period around
2002 was really a low point for them. It started
with lawsuits from I think it was 29 different
U .S. states accusing them of illegal monopoly
behavior. What were they actually accused of
doing? Two main things. First, they were allegedly
using sham patents to try and keep a generic
version of their anxiety drug bus bar off the
market. So trying to extend their exclusive sales
period. Right. And they were accused of doing
the same thing with their blockbuster cancer
drug, Taxol. Just trying to protect those revenue
streams for as long as possible, even if it meant
breaking the rules. And that ended up costing
them. A lot. They settled all those cases for
$670 million. It was a huge financial penalty
and a major black eye for their reputation. But
that wasn't even the biggest scandal that year,
was it? No, the really damaging one was the accounting
scandal. It was a practice called channel stuffing.
OK, can you explain what that actually means?
It sounds bad. It is bad. It's fundamentally
deceptive. What they were doing was offering
massive discounts to their distributors to get
them to buy way more product than they actually
needed. So they were flooding the channel with
inventory. Exactly. And then, and this is the
fraudulent part, they were booking all of those
sales as immediate revenue. They were basically
reporting sales for drugs that were just sitting
in a warehouse, not being sold to patients. So
it made their sales numbers look much better
than they actually were. Much better. It completely
misled investors about the health of the company.
And the fallout was severe. They had to restate
their earnings for, what, three years? From 1999
to 2001, yeah. And they settled with the Department
of Justice and the SEC for $150 million. But
it went beyond fines, didn't it? It did. The
company was forced to have a court -appointed
monitor, basically an outside watchdog, to oversee
their behavior. And some of their top executives,
the head of the SARMA group and the CFO, were
actually indicted on federal securities charges.
Wow. So that's a crisis that goes right to the
top. You can really see how a scandal like that
would force the kind of radical strategic change
we saw starting in 2007. You had to. It was an
existential threat. And we should also briefly
mention there was this other historical lawsuit
they were involved in related to the Guatemala
syphilis experiment. Right. A truly awful chapter
in medical history. BMS was named as a defendant,
but the source material notes they were officially
dismissed from that lawsuit in 2022. Okay, so
let's shift to how they manage their influence
today. Because with 71 % of their revenue coming
from the U .S., they have to be active in Washington.
Oh, they are very active. They spend between
$5 and $10 million every single year on lobbying
in the U .S. And that's just their direct spending,
right? That's just what they spend directly.
They also contribute huge amounts to industry
groups like PHRMA, the main drug lobby, and BioTanada
to make sure the industry's collective voice
is heard on issues like patents and pricing.
So it's a significant political operation, but
let's balance that with their global research
and philanthropic footprint. They're not just
based in New Jersey. Not at all. Their R &D network
is global. They have major sites in California,
Spain, Japan, multiple sites in India, the UK.
They're pulling talent from all over the world
to fuel that pipeline. And they fund a lot of
external science and health organizations, too.
A huge range. Everything from, you know, fundamental
research at the Institute for Advanced Study
to major hospitals in Canada like SickKids and
the Princess Margaret Cancer Center. They even
fund the National Geographic Society. It's a
very strategic way of supporting the entire ecosystem
that they depend on. It is. of success from that
ecosystem, let's just spotlight one current drug
that's really showing the promise of their new
model. Luspatercept or Reblizol. Right. This
is for anemia related to MDS, a type of blood
disorder. Exactly. Patients with MDS often need
constant draining blood transfusions. And in
a big phase three study, Reblazil proved it was
better than the older treatments. And that led
to a big FDA approval in 2023. A huge one. It
made Reblazil a first -line treatment for a big
group of these patients. That means it's now
the go -to drug, not something you try after
other things have failed. And the company has
some pretty big expectations for it financially.
They do. Their internal goal is for Reblazil
to be bringing in $4 billion a year in sales
by 2030. And that's exactly the kind of home
run they need to pay for all those massive acquisitions.
So when you step back and look at the whole story,
it's just it's an incredible journey. It really
is. What started as these two totally separate
companies in the 1800s, one obsessed with scientific
purity, the other selling toothpaste and Windex.
Has now merged, gone through this incredibly
painful process of shedding its entire consumer
identity, survived these massive scandals. And
completely reinvented itself. The Bristol -Myers
Squibb of today is this laser -focused global
biopharma machine. It's all about immunotherapy,
hematology, and now neuroscience. The whole story
is really a perfect case study of how big pharma
works, right? Controversy and competition force
you to change. That change leads to blockbuster
drugs. And then you have to spend billions and
billions to find the next blockbuster before
the old one dies. It's a cycle, a very expensive
cycle. And that brings us right back to where
we started with that $9 billion loss in 2024.
All of this activity, the buy to grow engine,
as you called it, it's incredibly high stakes.
It is. I mean, you add it all up. So Gene, Karuna,
Myocardia, Razobio, they've bet close to $100
billion in just the last five or six years on
buying future revenue. Their whole model depends
on these massive high -risk acquisitions to keep
the pipeline full. And that leaves us with a
final, really important question for you, the
learner, to think about. It's not just about
BMS. It's about the whole industry. How sustainable
is this model? This constant need to spend tens
of billions just to stay in the game? Exactly.
And what happens to the whole system if one of
these huge, multi -billion dollar bets doesn't
pay off? What if the new schizophrenia drug,
Covinfy, doesn't meet those sky -high sales expectations,
or if the radiopharmaceutical platform doesn't
deliver. That negative net income is the price
of making those bets. It's the cost of playing
the game at this level. It is. And it's a powerful
reminder that in the world of specialty biopharma,
the risks you have to take just keep getting
bigger and bigger.