Bristol-Myers Squibb Posts Steady Growth In Q3, But All Eyes Are On Checkmate 227 Trials
While Bristol-Myers Squibb’s (NYSE:BMY) recently released Q3 sales came in above consensus estimates, the stock tumbled close to 5% as there was a lack of clarity on a trial of a combination of Opdivo and Yervoy in treating lung cancer. It should be noted that Bristol-Myers Squibb’s future growth, and its current market value relies significantly on the expected growth of cancer drug Opdivo. We currently estimate that Opdivo will bring in over $6 billion in annual sales by 2021, accounting for nearly a quarter of the company’s revenue. However, there is some degree of unpredictability in the lung cancer market, where the competition is expected to increase this year and beyond, especially from Merck and Roche.
Opdivo, in our view, is the most important factor to consider for Bristol-Myers Squibb’s future growth. A lot is riding on the company’s Checkmate-227 program, under which it is evaluating the efficacy of Opdivo + Yervoy, among other combinations. The company’s management, during its earnings conference call, stated that it expects to see the final results for the combination in first-line non-small cell lung cancer in the first half of 2018, but didn’t provide any more details on the trial.
Looking at Q3, Opdivo posted 38% growth while year-to-date sales are up 45%. As expected, Eliquis also performed well, with around a 40% jump in revenues. Eliquis will likely continue its growth trajectory, primarily due to higher demand given the drug’s increased acceptance and market share gains. It has become a leading anticoagulant in new-to-brand prescriptions among cardiologists in the U.S., gaining strong traction among physicians for atrial fibrillation.
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Overall, we continue to believe that Bristol-Myers Squibb’s high reliance on Opdivo is somewhat concerning. It should be noted that there could be a downside of about 10% to Bristol-Myers Squibb’s valuation if Opdivo loses $2 billion in estimated peak sales.
Our price estimate of $52 for the company’s stock is around 15% below the current market price.
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