Morningstar | Bristol's Opdivo Liver Cancer Setback and Forced Sale of Otezla Are Mild Negatives
In tandem with the announcement of a failed Opdivo study in liver cancer, Bristol-Myers Squibb also announced the forced divestment of psoriasis drug Otezla to appease regulators regarding the Celgene acquisition. We see both announcements as mild negatives and don't expect any major changes to our fair value estimate. We continue to view Bristol as well entrenched in the immuno-oncology market with Opdivo, and the acquisition of Celgene still looks solid despite the Otezla divestment. We don't view these events as having a significant impact on Bristol's wide moat.Bristol's announcement of the failed Checkmate-459 study with Opdivo in liver cancer will hurt the potential of the drug, but we estimated less than 5% of 2023 Opdivo sales would come from first-line liver cancer. Further, other liver studies are ongoing that should support some Opdivo use in the liver cancer market. Additionally, we don't think there is any read-through from this study to other ongoing Opdivo studies in other cancer indications.
Also, the U.S. Federal Trade Commission is forcing the divestment of Otezla to clear Bristol's acquisition of Celgene. We are surprised that the FTC is forcing this divestment, as Bristol's other psoriasis drug, a TYK2 inhibitor, is not yet approved and has a different mechanism of action. Nevertheless, we expect several interested companies will bid on this divestment and we think it is unlikely Bristol will have to take a fire-sale price. However, we are slightly concerned about whether Bristol will still be able to achieve the $2.5 billion in annual cost synergies associated with the Celgene acquisition, as we viewed the psoriasis portfolio as a key area for synergy between the companies. Bristol now expects the acquisition to close in late 2019 or early 2020, a slight delay from the original guidance of the third quarter of 2019, but we don't view this as concerning, especially since the company needs time to sell Otezla.
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."
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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