This Healthcare Leader Just Made a Bet on Artificial Intelligence (AI): Time to Buy the Stock?

Artificial intelligence (AI) is changing every industry, and even companies outside the technology sector are partnering with Nvidia (NASDAQ: NVDA), one of the leaders in AI, to capitalize on it. One such corporation in the pharmaceutical industry is Bristol Myers Squibb (NYSE: BMY), which recently announced an expanded collaboration with Nvidia. Let's see what this means for the drugmaker.

Doubling down on AI

Bristol Myers has been using AI to improve the drug discovery and development process, which is typically slow and expensive. The company could launch medicines more quickly and at lower costs if its efforts are successful. To that end, Bristol Myers recently announced that it would build the most powerful AI factory in life sciences. The pharmaceutical leader is expanding its Nvidia partnership by deploying a next-generation DGX SuperPOD AI supercomputer to build a more powerful AI drug discovery platform. Bristol Myers has already started to see the benefits of its long-standing AI-related efforts, according to management, and this new investment could help further boost efficiency.

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Is the stock a buy?

Bristol Myers has encountered some headwinds in recent years. Revenue and earnings growth haven't been strong, largely due to patent exclusivity losses. The drugmaker still has major patent cliffs on the horizon, notably those of Eliquis, an anticoagulant, and Opdivo, a cancer drug. That said, Bristol Myers has worked hard to develop newer medicines to mitigate the impact of competition from cheaper generics and biosimilars. The company's pipeline features highly promising products, including a next-gen anticoagulant called milvexian, which could address the significant bleeding risk associated with today's blood thinners.

Bristol Myers is also developing a promising cancer drug, pumitamig, which is being tested across multiple indications. That's before we mention that it has received approval for Opdivo Qvantig, a subcutaneous formulation of the medicine that will remain patent-protected much longer than the original version.

Further, Bristol Myers' approved portfolio features several newer products helping push sales in the right direction. The stock also has a solid dividend program, and its valuation looks very reasonable. Bristol Myers is trading at 9.7x forward earnings, versus an average of 18.1x for healthcare stocks.

These are already good reasons to buy the stock at current levels, but Bristol Myers' AI efforts may move the needle somewhat over the medium term. It may take time, and the results will be fairly modest, but even cutting the time and costs of developing brand-new medicines by 1%, thanks to AI, would have a meaningful impact on Bristol Myers' business, given the dozens of active programs in its pipeline. For all those reasons, the stock is worth investing in today.

Prosper Junior Bakiny has positions in Nvidia. The Motley Fool has positions in and recommends Bristol Myers Squibb and Nvidia. The Motley Fool has a disclosure policy.