Morningstar | Bristol's Opdivo Gains First-Mover Advantage in Small Cell Lung Cancer Indication
On Aug. 17, the Food and Drug Administration approved Bristol's Opdivo for small cell lung cancer, or SCLC, opening the door to close to $2 billion in additional market potential with the new indication. We believe the first-mover advantage will help Bristol gain close to 45% of the SCLC market by 2022, and we are retaining our fair value estimate for the firm. Despite the strong recent stock performance, we still view Bristol as slightly undervalued, with the market underappreciating the company's strong position in immuno-oncology. Additionally, the strong position in immuno-oncology, combined with a strong portfolio of marketed drugs and pipeline drugs, helps reinforce our wide moat rating for Bristol.While the initial approval for Opdivo is in the refractory SCLC setting, we expect data from CheckMate-451 later in the year to show Opdivo plus Bristol's Yervoy to work well in the first-line SCLC setting. Bristol's data from the earlier-stage study CheckMate-032 showed the combination drug treatment to work better than Opdivo alone. This combination should also help Bristol compete against Roche, which showed positive first-line SCLC phase 3 data for its immuno-oncology drug Tecentriq in June. Additionally, both Merck and AstraZeneca will likely have first-line SCLC data with their immuno-oncology drugs in early 2019. However, we expect that Bristol's first-mover advantage in SCLC, plus the likely ability to combine Opdivo with Yervoy, will support Bristol's leading position in SCLC by 2022.
For a complete review of the immuno-oncology landscape, with a focus on lung cancer, please see our report titled "Overall Immuno-Oncology Market Underappreciated, Supporting Undervalued Wide-Moat Firms Roche, Merck, and Bristol-Myers." In the report, we highlight Merck's strong position in non-small cell lung cancer, or NSCLC, as well as Bristol's strong position in SCLC. While NSCLC represents a much larger market potential at close to $17 billion annually by 2022, the SCLC indication is still significant at $2 billion annually.
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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