Forget BMY’s Q2 Earnings, Watch Out For Opdivo Trials Going Forward

by Trefis Team
Bristol-Myers Squibb
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Opdivo and Eliquis were the usual suspects driving Bristol-Myers Squibb‘s (NYSE:BMY) growth in Q2 2017. There were no real surprises, but the recent Mystic trial results from AstraZeneca put Opdivo’s current trials under more scrutiny, and that’s what we expect the market to track going forward. We have discussed previously that Bristol-Myers Squibb’s future growth and current market value relies significantly on the expected growth of its cancer drug Opdivo. By 2020, we estimate that Opdivo will bring in over $5 billion in annual sales, accounting for nearly a quarter of the company’s revenue. The drug grew nearly 60% in Q1 2017, but this growth slowed down to just over 40% in the second quarter. This is expected as the drug’s revenue base expands. However, there is some degree of unpredictability in the lung cancer market, which the company continues to acknowledge. Not only it is an incredibly hard to treat disease, with limited advancements in recent years, the competition is also expected to increase. This makes Opdivo, in our view, the single most important factor to consider for Bristol-Myers Squibb’s investors.

Our price estimate of $52 for the company’s stock is slightly below the market price.

A lot is riding on Bristol-Myers Squibb’s Checkmate-227 program. Under this program, the company is evaluating the efficacy of Opdivo + Yervoy, Opdivo + chemo in PDL1 negative patients, and Opdivo + chemo. However, AstraZeneca’s shares tumbled recently as its Mystic trial, which was testing a combination of PD-L1 targeting agent and CTLA-4 targeting agent against standard chemotherapy, failed to meet its primary objective in first line treatment of lung cancer. This casts some doubt over Bristol-Myers Squibb’s own trials and the potential of Opdivo to continue gaining traction in the challenging lung cancer market.

We estimate that cancer drugs, including Opdivo, account for nearly 60% of Bristol-Myers Squibb’s value. While the company’s management is confident about its own trials – citing differences in dosage, schedule and patient population in AstraZeneca’s Mystic trials – there could be a downside of about 10% to Bristol-Myers Squibb’s price estimate if Opdivo loses $2 billion in estimated peak sales.

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