Bristol-Myers Squibb’s (NYSE:BMY) performance has traditionally depended on some of its bestselling drugs like Plavix and Avapro/Avalide. However, the sales of these two drugs have plummeted in the recent past after they lost patent protection last year. The company faces more patent expirations in the coming years and is focusing on the pipeline of its existing and upcoming drugs for future growth.
Fortunately, Bristol’s new drugs sales are promising. Excluding the sales of Plavix and Avapro/Avalide, the sales of this pharmaceutical giant actually grew by 10% y-o-y in the first quarter of this year (see our earnings article for detailed analysis). The company’s prospects also look bright as some very positive news regarding its drug pipeline was reported recently.
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This week on May 15, the company released preliminary data from its Phase 1 Nivolumab and Yervoy combination study (both nivolumab and Yervoy are cancer drugs). The study suggests that the combination of Yervoy and Nivolumab reduced tumors in the majority of melanoma patients. A few days before that, two other drugs – Eliquis and Metreleptin – were reported to be showing positive results in clinical trials, while an older medicine called Sustiva was approved in the U.S. for children below the age of three years.
Yervoy and Nivolumab
Yervoy is an antibody for the treatment of unresectable (inoperable) or metastatic melanoma. It works by disabling the protein (called CTLA-4) that prevents the immune system from attacking the cancer. Nivolumab is a drug in late stage testing that also attacks an immune system-inhibiting protein called PD-1. Nivolumab is in phase III trials in renal cell cancer, melanoma and non-small cell lung cancer. (Read more about Yervoy and Nivolumab here)
Bristol-Myers has been experimenting with a combination of these drugs on melanoma patients and released preliminary data from its Phase 1 Nivolumab and Yervoy combination study. The preliminary results of the test suggest that the combination therapy of Yervoy and Nivolumab reduced tumors in the majority of melanoma patients and was more effective than either of the medications individually.  
Bristol’s formulation also appears to have shown better results than competing programs of Roche (PINK:RHHBY) and Merck (NYSE:MRK).  The market seems to be cheering these results as Bristol’s shares rose almost 5% on May 15, in anticipation of this data.
We remain optimistic about the prospects of the company’s immunotherapy drugs. However, caution is important, as the drug approval process is long and full of pitfalls. Typically, the R&D process for a drug takes 13 years or longer, with nearly three years spent in Phase III. 95% of the compounds that enter Phase I, and usually fail to achieve regulatory approval, according to the KMR Group’s study based on the industry success rates from 2007-2011. .
Since the Nivolumab + Yervoy combination study results are from a Phase I study, we believe that there is still a lot of uncertainty about the success of the drug combination. Even if the formulation passes regulatory hurdles, the impact of the combination’s success will be felt only in the next decade. We also do not expect Nivolumab to start contributing to the company’s revenue as an individual drug before 2015, because it entered Phase III trials in 2012, and drugs usually take three years to clear this phase. Reaching peak sales could take a few more years.
Considering the high level of uncertainty in the process, our model does not currently consider these drugs as a major driver for the company’s valuation.
Eliquis is Bristol’s new anticoagulant drug for heart patients and has been widely forecasted to become the company’s next big blockbuster drug. The drug was approved by the FDA in the U.S. in December 2012, and could reach peak sales of around $4 billion in the next 4-5 years, according to consensus estimates.
One of the reasons why expectations from this drug are high is because last year the drug was demonstrated to be more effective than warfarin, a standard treatment in reducing the risk of a stroke or systematic embolism. The test, called ARISTOTLE, demonstrated that Eliquis significantly reduced the risk of a stroke or systematic embolism by 21% compared with warfarin.
Earlier this month, the company further announced that “the treatment effects of Eliquis® (apixaban) vs. warfarin, across a broad range of warfarin control, are consistent with primary results of ARISTOTLE”. This is positive news for the efficacy of the drug, and we remain optimistic about its prospects.
In 2012, Bristol acquired a protein called Metreleptin as part of the Amylin acquisition. The protein is being co-developed with AstraZeneca and aims to treat lipodystrophy, a disease that causes the loss of fat tissue (especially under the skin). Earlier this month, the company announced that the drug was shown to reduce average blood sugar levels in pediatric patients with this disease. The company already has plans for a U.S. submission for the treatment of lipodystrophy in 2013, and we believe that this drug could add more value to the company’s diabetes portfolio.
Sustiva is a drug for the treatment of HIV-1 infected children. It was originally approved in the U.S. in 1998 to only treat children who are at least three years old and weigh at least 10 kg. However, earlier this month, the company announced that the U.S. Food and Drug Administration (FDA) has approved the use of this drug on HIV-1 infected children who are three months to three years old and weigh at least 3.5 kg. We believe that this is another positive news for the company and is likely to boost the prescription demand for the drug going forward.
- Combo therapy of Yervoy + Nivolumab shrank tumors in 75% of melanoma patients, MedCity News, May 15, 2013 [↩]
- Combining Ipilimumab and Nivolumab Shows Promise in Advanced Melanoma, Onclive, May 15, 2013 [↩]
- Bristol-Myers edges ahead in race to develop first blockbuster PD-1 cancer drug, FierceBiotech, May 16, 2013 [↩]
- SEC Filings page 9, BMS [↩]