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Has anyone looked into the huge difference between their GAAP and non-GAAP earnings?  They tried to explain a little in the annual report, but I'm skeptical.

Does anyone believe their non-GAAP earnings? Do you make any corrections to them? 

The other thing that bothers me is they pay high amounts for their acquisitions.  Why couldn't they see the opportunities earlier and acquire them cheaper?

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BMY like other pharma buys R&D and then has to expense it via amortization ands writeoffs. They bought CELG which resulted in a huge amount of intangibles. MRK has the same issues to a lesser extent.

The problem really is two fold - some R&D that is purchased never works out and is a total loss and those that do work out have a finite shelf live due to patent expiration. I think the economic truth is somewhere between the GAAP and the non GAAP numbers but i cant determine owners earnings with any real precision. I do think that big pharma is cheap, but all the above are a real issues.

FWIW, I own a little BMY (from a while back when the stock really declined due to the merger with CELG) and MRK (purchased recently around current prices). i think both are cheap but not as cheap as non GAAP earnings suggest and Mr Market knows this.

Edited by Spekulatius
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Thanks @Spekulatius for sharing.  Yes, I saw the intangibles amortization in calculation of non-GAAP earnings in the annual report, but then I saw other skeptical items there as well. Appreciate your perspective on this.  Makes sense.

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