Opdivo In Focus After BMY’s Checkmate-214 Study Being Stopped Early

Bristol-Myers Squibb‘s (NYSE:BMY) oncology business accounts for over 60% of the company valuation, according to our estimates. The performance of pharmaceutical stocks is highly tied to clinical trial results, and for Bristol-Myers Squibb the uptake of its new cancer drugs, especially Opdivo, is of key importance. Earlier this month, the company reported that a study looking at a combination of two oncology drugs – Opdivo and Yervoy – in the treatment of renal-cell cancer worked well enough to be stopped early. ^[1] This is a positive development for the company, and if the drug combination is approved, it would result in even higher contribution of oncology revenues for Bristol-Myers Squibb. We currently expect the company’s oncology revenue to jump from nearly $7 billion in 2016 to more than $12 billion by the end of our forecast period, implying annual average growth of just under 9%.

Our price estimate of $52 for Bristol-Myers Squibb’s stock is more than 15% below the market price. The company’s stock price has moved up around 5% this month, following the news of Opdivo – Yervoy study for renal cell cancer being stopped early.

Opdivo – Yervoy Combination Can Reduce Kidney Cancer Deaths By 37%

Based on the Checkmate-214 trial, in intermediate- and poor-risk patients, the Opdivo – Yervoy combination delivered a 37% reduction in the risk of kidney cancer death. The Opdivo – Yervoy combination beat Pfizer’s (NYSE:PFE) Sunitinib at the co-primary endpoint of overall survival in intermediate and poor-risk patients and the secondary endpoint of overall survival in all of the study’s randomized patients. Based on the outcome of the study, Bristol-Myers Squibb could file for full FDA approval for first-line treatment of renal cell carcinoma. ^[2] It should be noted that renal cell carcinoma is the most common type of kidney cancer in adults, accounting for more than 100,000 deaths worldwide each year. Overall this development is positive for the company, and based on the FDA approval for this drug combination for renal-cell cancer treatment, Opdivo will likely generate even more revenues in the coming years. Looking at 2016, Opdivo generated $3.78 billion in global sales while Yervoy generated around $1.5 billion. ^[3] We currently estimate that Opdivo will bring in over $5 billion in annual revenue by 2020. The growth for Bristol-Myers Squibb’s overall oncology portfolio is likely to be steep in the next couple of years, but will moderate around 2020 as Sprycel and Yervoy lose patent protection. It should be noted that the revenue from the pipeline is adjusted to reflect around a 50% probability of phase 3 drugs reaching market launch.

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1. Bristol-Myer Squibb’s Press Release, Sep 7, 2017 [↩]
2. Bristol-Myers’ Opdivo-Yervoy cocktail slashes kidney cancer death risk by 37%, FiercePharma, Sep 10, 2017 [↩]
3. BMY’s SEC Filings [↩]