Eliqius A Huge Growth Catalyst For Bristol-Myers Squibb

| About: Bristol-Myers Squibb (BMY)

One of the key components of my bullish take on Bristol-Myers Squibb (NYSE:BMY) is its drug Eliquis. The drug is an oral direct Factor Xa inhibitor, part of a new therapeutic class. By inhibiting Factor Xa, a key blood clotting protein, it prevents thrombin generation and blood clot formation.

In May 2011, Bristol-Myers Squibb and Pfizer (NYSE:PFE) announced the first regulatory approval for Eliquis in the 27 countries of the European Union plus Iceland and Norway for the prevention of venous thromboembolic events in adult patients who have undergone elective hip or knee replacement surgery.

On November 20th, 2012, Bristol-Myers Squibb and Pfizer announced the European Commission became the first regulatory authority globally to approve Eliquis for the prevention of stroke and systemic embolism in adult patients with nonvalvular atrial fibrillation with one or more risk factors. Bristol-Myers Squibb and Pfizer announced on December 6th, 2012, that Health Canada approved Eliquis for the prevention of stroke and systemic embolism in patients with atrial fibrillation.

Atrial fibrillation is irregular heartbeat with a huge global market as shown by Plavix's reign as a blockbuster for many years. There are some 6 million people in Europe and another 6 million in the U.S. suffering from atrial fibrillation. The chance of developing this condition rises to 25% above the age of 40. Patients with atrial fibrillation have a five times greater risk of stroke and therefore there is a critical need for treatment options.

Stroke Prevention in Atrial Fibrillation represents a very large market, as besides a very large prevalence, there is a very clear unmet need. With a market of 12 million people being treated for atrial fibrillation and expecting a 50% shift in treatment from existing treatments like wayfarin to the new generation of anticoagulants the market size will be a sizeable 6 million. Given that Pradaxa and Xarelto are priced around $2,500 per year, it is likely that Eliquis will see sales around $5 billion per year.

At $5 billion per year in sales, Eliquis should realize somewhere between $3.5 billion and $4 billion a year in profitability. Sharing the profits equally with Pfizer means that Bristol will realize somewhere between $1.75 billion and $2 billion per year. This translates in to roughly $1 earnings per share. This is a significant impact on Bristol's bottom line as that figure occupies roughly 50% of the company's 2012 earnings per share.

The drug is still awaiting approval in the United States. The main reason for the holdup has been that there is no antidote to the effects of the drug that can be used in bleeding emergencies. Anticoagulants of a different class have seen problems associated with increased bleeding. Pradaxa has been associated with an increased risk of bleeding and the threat of lawsuits is very high. Bayer's (OTCPK:BAYN) Lepirudin was withdrawn this year due to very high risks of bleeding. The FDA is acting with caution around Eliquis for this reason, and has postponed approval of the drug twice.

A small San Francisco biotech company may have the answer. Portola Pharmaceuticals has developed a compound designed to reverse the anticoagulant activity of any many clotting inhibitors. The compound, PRT4445, is a universal Factor Xa inhibitor antidote in clinical development designed to reverse the anticoagulant activity of any Factor Xa inhibitor. No agents are approved to reverse the activity of Factor Xa inhibitors. The company recently signed an agreement with Bristol and Pfizer to enter into trials before the end of the year after nonclinical data has shown reductions in bleeding in animals being treated with Arixtra, made by GlaxoSmithKline (NYSE:GSK), and Xarelto, made by Johnson & Johnson (NYSE:JNJ).

The collaboration will be in effect during the clinical proof-of-concept study, which is anticipated to start by the end of this year. The study is designed to demonstrate the safety of PRT4445 and its ability to reverse the anticoagulation activity of Eliquis and other Factor Xa inhibitors. Bristol-Myers Squibb and Pfizer will make an undisclosed cash payment to Portola upon initiation of the proof-of-concept study with Eliquis and will provide development and regulatory guidance for the study. Portola retains 100 percent global development and commercialization rights for PRT4445. This antidote will not work on Pradaxa due to the drugs using a different mechanism of action. The success of the antidote will prove to be a huge boon for Bristol and Pfizer and will not doubt lead to a big decline of Pradaxa.

With the recent approval of Eliquis in Europe and the promise of another drug providing an antidote to potential bleeding problems, the future looks bright for Bristol-Myers Squibb. I believe the stock will see a boost as we move into 2013 from the European approval alone. If the results of the PRT4445 study look good, I anticipate the stock will move even higher by the time the FDA looks to approve Eliquis in the spring.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.