Morningstar | Bristol Posts Negative Immuno Oncology Data in Smaller Cancer Setting, Leading to FVE Cut
Bristol-Myers reported disappointing Phase III data from CheckMate 451 in small cell lung cancer, or SCLC, with Opdivo and Yervoy, leading to a fair value estimate cut to $61 from $64. While the drug combination continues to look well positioned in melanoma and renal cancer, the failure to show a survival benefit in SCLC reduces our peak sales for Bristol's immuno oncology drugs to just over $10 billion, down by close to $800 million annually. Nevertheless, Bristol's solid positioning in immuno oncology in other indications combined with a strong portfolio of both marketed and pipeline drugs continues to support a wide moat.The disappointing results from CheckMate 451 follow mixed earlier data in the refractory SCLC setting. Partly based on strong data from CheckMate 032 study, Bristol gained approval for Opdivo in refractory SCLC in August 2018 and set up an expectation for positive data from CheckMate 451, which was in a healthier patient population. However, the disappointing SCLC data from Checkmate 331 did suggest Opdivo may not have as much of a benefit as seen in early-stage studies. The poor results from CheckMate 451 hurt Bristol's immuno oncology franchise in this smaller cancer indication. As a reminder, SCLC represents close to 10%-15% of lung cancer according to the American Cancer Society.
Given the strong data emerging from Roche's Tecentriq and Merck's Keytruda in SCLC, we don't expect Bristol will gain much market share in the SCLC setting. While Opdivo will still likely hold on to a small share of the SCLC market, we expect Roche and Merck to gain the lion's share of the SCLC market with their immuno oncology drugs. We don't expect to change our sales projections in other cancer indications, as we don't believe these results have many implications for other types of cancers.
For a deeper dive into the outlook for Opdivo and competitive immuno-oncology drugs, please see our June report, "Overall Immuno-Oncology Market Underappreciated, Supporting Undervalued Wide-Moat Firms Roche, Merck and Bristol-Myers." Please note that with the recent stock appreciation, we now view Merck as closer to fairly valued.
Bristol-Myers Squibb is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products. The company's products are sold worldwide, primarily to wholesalers, specialty distributors, retail pharmacies, hospitals, government entities and the medical profession. The company manufactures products in the United States and Puerto Rico and has manufacturing operations in two foreign countries. The company has products in the following therapeutic classes: hematology, oncology, cardiovascular and immunology. The company's pharmaceutical products include chemically-synthesized or small molecule drugs and products produced from biological processes, called biologics.
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