Why Opdivo Is The Most Important Driver For Bristol Myers Squibb’s Future Growth

by Trefis Team
Bristol-Myers Squibb
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Bristol-Myers Squibb’s (NYSE:BMY) oncology business accounts for over 60% of the company’s valuation, according to our estimates. Oncology is the only segment for BMY where we expect solid revenue growth in the coming years while all other segments are forecast to see revenue declines. Most of the company’s virology, immunology, neuroscience, and mature drugs are expected to face stiff competition from biosimilars, given that the patents for most of the drugs within these segments have expired or are about to expire in the near term.  While we expect the company’s Cardiovascular portfolio, which primarily consists of Eliquis, to do well over the next few years, it is expected to peak in 2021-2022, as its patent will expire in 2023. The chart below shows the contribution of each segment to BMY’s overall historical and estimated revenues.

Looking at the Oncology segment, BMY’s key drugs include Opdivo and Empliciti. In fact, Opdivo alone accounts for more than 50% of the segment revenues and close to 20% of company-wide revenues. Opdivo was first approved by the FDA in 2014 for advanced melanoma. In 2015, the drug received further approvals for treatment of lung cancer and metastatic renal cell carcinoma. Further in 2016, it received approvals for the treatment of Hodgkin lymphoma, head and neck cancer, and its combination with Yervoy for the treatment of metastatic melanoma. This year, the drug was approved for previously treated metastatic urothelial carcinoma, metastatic colorectal cancer that has progressed following treatment, and for the treatment of hepatocellular carcinoma for patients previously treated with Sorafenib. Looking forward, we await for more clarity on the Checkmate – 227 trials, where Opdivo is being tested in combination with Yervoy for first-line non-small cell lung cancer treatment. The company’s management, during its Q3 2017 earnings conference call, stated that it expects to see the final results for the combination in the first half of 2018, but didn’t provide any more details on the trial. Earlier this year, the Checkmate – 214 trials showed encouraging results for the same combination for the treatment of kidney cancer.

Based on Opdivo’s advancement, and its continued expansion, we believe it will be a key growth driver for BMY in the coming years. We currently estimate the drug’s sales to peak at over $6 billion in 2022. Lung cancer is one of the most common cancers in the world, accounting for nearly 14% of all diagnosed cases and 25% of cancer related deaths each year. Squamous and non-squamous non-small cell lung cancer in particular constitutes roughly 85% of all lung cancers, which is what Bristol-Myers Squibb is targeting. It should be noted that the drug’s patent is protected until 2026-2027 and it is unlikely to see any significant drop in sales until it approaches patent expiry. Opdivo can also leverage the fact that rival drug Keytruda’s potential EU approval in lung cancer has been delayed. Overall, based on the factors discussed above, we believe Opdivo will remain the most important driver for BMY’s future growth.

Our current price estimate for Bristol-Myers Squibb stands at $54, implying a discount of over 10% to the current market price.

See our complete analysis for Bristol-Myers Squibb

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