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Morningstar | BMY Updated Forecasts and Estimates from 29 Apr 2019

Bristol reported first-quarter results largely in line with our expectations, and we don't expect any significant impact to our fair value estimate based on the results. We continue to view the company as undervalued despite competitive pressures in the immuno oncology market that are likely weighing on the company’s valuation. Further, the recent shareholder support from both Celgene and Bristol should drive the closure of the acquisition by the third quarter, and we continue to believe the combined companies are well positioned to drive long-term growth. Additionally, we continue to view Bristol's moat as wide, supported by a solid lineup of currently marketed drugs and a growing pipeline that will be augmented with several strong pipeline drugs from Celgene.

In the quarter, total sales increased operationally 18%, led by immuno oncology drugs Opdivo and Yervoy and cardiology drug Eliquis, but we expect growth will slow later in the year as competition increases against Opdivo. We believe Eliquis holds the best clinical profile in the atrial fibrillation market, which should continue to drive further market share gains largely at the expense of older drug warfarin. While Opdivo continues to grow, we expect growth will slow due to strong clinical data from Merck's Keytruda in first-line lung cancer, as this will likely cause the second-line lung cancer market to shrink, which will hurt Opdivo's strong position in this refractory setting. However, we continue to expect modest overall growth from Opdivo based on solid positioning in melanoma, renal cancer, and new indications. Even though we doubt the upcoming studies with Opdivo in first-line lung cancer expected to read out this summer and in 2020 will show better data than Keytruda, we expect strong enough data to support approval in the first-line setting and likely some differentiating points that will enable minor market share gains for Opdivo in the large first-line lung cancer market.

For our complete review of Bristol's and Celgene's pipelines, please see "Annual Drug Pipeline Report: Moats Remain Secure as Innovation Counters Pricing and Generic Headwinds, but M&A Accelerating."