Bristol-Myers’ Stock Falls On Safety Concerns Of Hepatitis C Drug

Bristol-Myers Squibb (NYSE:BMY) has announced that it is suspending clinical trials of its oral Hepatitis C drug, BMS-986094, formerly known as INX-189. ^[1] The drug which was in Phase 2 of clinical trials was administered to a patient who subsequently experienced heart failure. The company regards this as a serious safety issue and has thus taken the step.

It had acquired INX-189 in February earlier this year, through the $2.5 billion acquisition of Inhibitex. INX-189 was the main driver for the acquisition. Also, developing an oral drug for treatment of Hepatitis C, a liver disease, is a multi-billion dollar opportunity for pharmaceutical companies. Its current treatment consists of interferon, which is an injectable that can be difficult to tolerate for patients. As a result, the announcement for suspension of clinical trials of INX-189 on Wednesday, lead to an 8.5% decline in share price of Bristol-Myers on Thursday.

Other pharmaceutical companies that are in the race to develop an oral medication for treatment of Hepatitis C include, Gilead Sciences (NASDAQ:GILD) and Abbott Laboratories (NYSE:ABT). However, Bristol-Myers still possesses another major drug, daclatasvir in its Hepatitis C development pipeline. And, even though suspension of clinical trials of INX-189 is a setback, the outlook for the company is stable as it possesses several key drugs in its portfolio.

We currently have a stock price estimate of $35 for the company, approximately 5% above its current market price.

See our complete analysis for Bristol-Myers Squibb here

Will the costly Inhibitex acquisition provide returns?

Bristol-Myers had acquired Inhibitex for $2.5 billion in February 2012, primarily because of its lead asset, INX-189. The company had paid a premium of over 160% during the time for the acquisition. The drug was then under Phase 2 of clinical trials. However, the suspension of clinical trials of the drug due to safety concerns has posed a question on the future of the drug, and whether the costly acquisition will be able to provide returns.

An oral Hepatitis C drug is a multi-billion dollar opportunity

From a business perspective, an oral drug for treatment of Hepatitis C is a multi-billion dollar opportunity. Hepatitis C is caused by the Hepatitis C Virus (HCV), which affects the liver. It is primarily transferred through blood-to-blood contact via usage of poorly sterilized syringes. The disease infects an estimated 130-170 million people worldwide and the current treatment involves usage of interferon, administered through an injection. ^[2] Interferon can be difficult to tolerate for certain patients. Thus, an effective oral Hepatitis C drug has a big market.

Bristol-Myers and Gilead Sciences had INX-189 and GS-7977 respectively, in their Hepatitis C development pipelines. GS-7977 is currently under Phase 3 of clinical trials and is expected to be submitted for regulatory approval by mid-2013. Shares of Gilead jumped nearly 7% yesterday on news of suspension of clinical trials of INX-189. In a market, where launch of an effective drug prior to competitors provides significant benefits, Bristol-Myers has received a setback.

However, not all is lost for the company. It still has another oral Hepatitis C drug, daclatasvir belonging to the NS5A class of Hepatitis C drugs. The drug was found effective when used in combination with Gilead’s GS-7977. However, Gilead has not shown much inclination towards proceeding with further trials of the combination as it has its own NS5A under development.

Abbott Labs is also developing an oral drug targeted at treatment of Hepatitis C, and has indicated for a possible launch in 2015.

Suspension of clinical trials for INX-189 a setback, but outlook is stable

On the whole, the unexpected safety issues related to INX-189 have pulled Bristol-Myers back in the race to launch an effective oral Hepatitis C drug. However, the pharmaceutical major still possess several key drugs in its portfolio that can drive revenue growth for the company over the next few years.

Understand How a Company’s Products Impact its Stock at Trefis

1. Bristol-Myers Squibb Suspends Administration of Study Drug in Clinical Trial of Investigational NS5B Nucleotide for the Treatment of Hepatitis C, August 1 2012, www.businesswire.com [↩]
2. Hepatitis C, www.wikipedia.com [↩]