Bristol-Myers Squibb (BMY) stock is trading near the high end of 52 week range. The current P/E of 13.35 is low which suggests the stock could return to a P/E multiple of 15 in the near future. The upside in the stock price would be driven by several factors.

James Cornelius turnaround strategy seems to be working

In 2007, when Jim Cornelius became interim CEO of Bristol-Myers Squibb Co., the company was at its nadir. The board, under pressure from a federal monitor, had fired the long-time CEO, Peter Dolan, and its general counsel, Richard Willward, because of a botched attempt to delay entry of a generic competitor to its best-selling anti-coagulant clopidogrel (Plavix).

Last year, the company embarked on a new strategy aimed at divesting non-core businesses and investing funds in higher-margined pharmaceuticals, with a particular focus on cutting-edge biotech therapies. In line with this strategy, Bristol raised $4.5 billion from the sale of its ConvaTec wound and ostomy care and medical imaging businesses during 2008, with an additional $720 million obtained in early 2009 through an initial public offering (IPO) of a 15% stake in its Mead Johnson nutritional products subsidiary. Proceeds from these deals are slated to put money to work in more high-margined biopharmaceuticals, which I believe offer significantly greater long-term growth potential.

I see Bristol achieving continued success in its growing R&D pipeline, which in my opinion, includes a number of promising late-stage drugs such as Onglyza, a novel DPP-4 inhibitor for type 2 diabetes, which recently received FDA approval; dapagliflozin, another diabetes compound; apixaban, a drug for acute coronary syndrome; and ipilimumab, a treatment for solid tumors. I believe these products and others, along with ongoing cost streamlining measures, will provide the underpinning for continued earnings growth following the 2011-2012 patent "cliff." With about $9 billion in cash ($2.7 billion, net of debt) as of June 30, and free cash flow for 2009 estimated at $4.2 billion, we think Bristol is in good financial shape to maintain its $1.24 annual dividend (presently yielding 5.7%), and grow its business.

Attractive drug portfolio

BMY has close to 50 drugs in development, covering new treatments for psychiatric disorders, Alzheimer's disease, arteriosclerosis and thrombosis, cancer, diabetes, hepatitis, HIV/AIDS and other conditions. Many of these compounds are being developed through partnerships with other pharmaceutical and biotechnology companies. Through a collaboration with AstraZeneca (AZN 46, hold), BMY is developing saxagliptin and dapagliflozin compounds for type 2 diabetes.