Bristol-Myers Squibb Asks for Patience as Takeover Chatter Reemerges Post-ASCO

June 9, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Bristol-Myers Squibb and Merck are in a head-to-head race to dominate the immuno-oncology marketplace, but at this time Merck appears to have the edge with its drug Keytruda. Bristol-Myers, on its part, insists it’s not out of the race yet, that its own drug Opdivo is still a powerhouse, and investors should be patient.

In many ways, Bristol-Myers Squibb never fully recovered from bad news in August 2016, when its clinical trial of Opdivo (nivolumab) as monotherapy in non-small cell lung cancer (NSCLC) failed. Stock took a hit then and hasn’t recovered that much. And then, at the recent ASCO meeting, despite overall good news, investors weren’t buying it. The stock dropped on June 6 to $51.66, a loss of about $4.3 billion in market value.

Seeking Alpha wrote on June 7, “Underwhelming two-year survival data from Opdivo plus Yervoy in a Phase I lung cancer study probably did the most damage; the stakes are incredibly high here ahead of a crucial pivotal readout early next year. Even Bristol’s announcement that it would be fast-tracking its in-house IDO inhibitor into pivotal studies could not lift spirits.”

Seamus Fernandez, an analyst with Leerink Partners, told BloombergMarkets, “This is a blisteringly fast race for patients,” and called Bristol-Myers’ lung cancer decision “a major misstep.”

Some investors are urging Bristol-Myers to acquire someone—or be acquired—to bolster stock value and boost its oncology portfolio. In a lot of ways that seems very impatient. There are more than 240 clinical trials underway that use Opdivo, so it’s almost inevitable it will reach a wider market. Investors are primarily concerned it will remain a combination drug instead of a frontline treatment.

Geoff Meacham, an analyst with Barclays, recently wrote in a note to investors, “We think it’s clear that Bristol’s doing some genuinely interesting science and taking worthwhile risks with next gen agents like LAG3, IDO, and GITR that could meaningfully pay off down the road. However, we remain somewhat uncomfortable with the ambiguous stance on how the CheckMate-012 two-year data serves as a potential predictor for CheckMate-227, which remains foremost on investors’ minds. Without question, there is more to Bristol’s investment case than just front-line lung, but the lack of clarity on how it will get to participate in this important market segment over the intermediate term outweighs the otherwise impressive discovery and translational efforts.”

Which is why Bristol-Myers is urging patience. “We are addressing cancer from all angles and our deep understanding of cancer biology and industry-leading pipeline will enable us to identify the right treatment, for the right patient, at the right time,” said company spokeswoman Audrey Abernathy to BloombergMarkets.

It’s possible, of course, that investors have a more nuanced perspective on the company. There were choices made that backfired regarding the lung cancer trial. BloombergMarkets noted that, “It could either go for a wide group of lung cancer patients who had a low level of a tumor protein that indicated the drug might help them. Or it could build a trial around a narrower group—and smaller market—of patients with high concentrations of the biological signal.”

And some of the company’s external science consultants were concerned about the broader approach, but that’s the route Bristol-Myers took. And when it designed the trial, its endpoint was whether the treatment halted patients’ tumors from progressing, instead of helping them live longer, which is the higher goal. The strategy was apparently in hopes of having positive results sooner than Merck—which was a gamble that didn’t pay off.

And although Opdivo is being evaluated in over 240 clinical trials, Merck’s Keydruda is being tested more than 500, and is expected to outsell Opdivo next year. Last year Keytruda sold less than half of what Opdivo did.

Thomas Lynch, Bristol-Myers’ chief scientific officer, however, told BloombergMarkets, “We are early in the game. It is just the first quarter.”

Bristol-Myers is currently trading for $53.16.