Bristol-Myers 2012 Recap
Bristol-Myers Squibb (NYSE:BMY) has had a fantastic start to 2013 so far, with the stock's PPS up about 24% since Jan 2nd. 2012 saw strong growth from immuno-Oncology brands such as Orencia, Yervoy, Sprycel, and Erbitux. While overall sales were down 17% in 2012, sales excluding Avapro and Plavix increased 10%, which was driven mainly by the sales growth of immunology and oncology products. The launch in Q1 of Eliquis will also be very important as it has the ability to bring in close to $500 million for BMY/Pfizer (NYSE:PFE) each in its first year. Financially, tax rates will decline in 2013 as BMY will see about a 1.5% reduction due to the federal R&D tax credit. Also, Plavix had a higher tax rate than other products, which will help the company's overall tax rate decline to about 16%. To use this as a comparison, 2011's effective tax rate was 24.7%. One negative to keep in mind is that BMY's free cash has decreased and debt increased with the acquisition of Amylin. BMY has $6.56 billion in long term debt on the books, which is a more than $1 billion increase from 2011. Cash and cash equivalents also decreased to $1.66 billion at the end of Q4 2012 from $5.78 billion at the end of Q4 2011. Cash will increase quarterly however as the company's share buyback is about 75% complete and the Amylin acquisition has been paid out.
BMY has specifically targeted immunology and oncology as an area for internal development, which I see as a positive. Some of the highest grossing and highest margin products are in these two therapeutic areas and have made Roche/Genentech (PINK:RHHBY.OB) into the $200 billion market cap stock that it is currently trading at. Roche's 3 top grossing products lines, Rituxan/Mabthera, Herceptin, and Avastin brought in a combined $19.5 billion in 2012 sales. To put this into perspective, that was more than BMY's total sales during 2013. Humira, AbbVie's (NYSE:ABBV) Rheumatoid Arthritis drug, brought in $9.26 billion alone (not including Eisai sales in Japan). 6 of the top 10 grossing products in 2012 were immuno-Oncology products. This shows a shift in priority in the pharmaceutical market to biologics, immune-based drugs, and those that target cancer. This shift in R&D policy is due to the fact that many widespread conditions already have several products (probably generics by now) to treat that condition, and because immuno-Oncology products are higher cost/margin products. Also, as science develops, we begin to know more about immuno-Oncology on a daily basis.
Currently, Bristol-Myers has several products in its immuno-Oncology portfolio that have been approved by the FDA for use in the US. These include Orencia, Sprycel, Yervoy, Erbitux, Ixempra, and Nulojix. While 2012 overall sales were not overwhelming in either therapeutic area (Oncology $2.89 billion and Immunology $1.19 billion), growth will continue as several of the products are new to the market, and are close to gaining expanded labels. 22% and 29% growth was seen in the Oncology and Immunology therapeutic areas with Yervoy increasing 96% YOY to $706 million. Q4 sales were also over $200 million meaning that it is approaching blockbuster status in its first full year after approval.
Ipilimumab, known by the trade name Yervoy, is a monoclonal antibody that blocks cytotoxic T-lymphocyte-associated antigen 4, which starts an antitumor T-cell response. In clinical trials, Ipilimumab showed increased overall survival for HLA*0201-positive patients with unresectable stage III or IV melanoma to 10.1 months from 6.4 months in patients taking gp100. 2.1% of patients on the drug during the trial died, and half were associated with immune-related events. 36% reduction of progression was also seen in Ipilimumab patients towards gp100 alone. To put this in comparison to other therapeutic agents for stage III and IV melanoma, 1 year survival with Ipilimumab was seen in 45.6% of patients (other agents range from 22-38%). Long term study results were also reported at ESMO in 2012, which showed that the four year survival rate was 19.0% in Ipilimumab+Dacarbazine patients, which was compared to a 9.6% survival rate for Dacarbazine(a generic chemo drug) patients. This shows superior efficacy when it comes to survival time, which ultimately late stage cancer patients are looking for.
Yervoy is priced at $30,000 per dose or $120,000 annually, which is not outside the range of other similar cancer treatments (Kadcyla, $9800 per month). Yervoy will continue to grow as a brand with future approvals for more widespread use including that in prostate cancer and lung cancer. Yervoy's market share in Q4 was very strong according to CEO Lamberto Andreotti, and 1st line market share was about 30%. Yervoy is also commercially reimbursed in Germany and the UK. It has been one of the best launches for the past decade in oncology. Currently, Yervoy is approved for use in late stage melanomas, but BMY will most likely gain approval for use of Yervoy in prostate cancer by 2015. Use may be limited due to immune-based adverse events, however. With the likes of Medivation's (NASDAQ:MDVN) Xtandi, and Johnson and Johnson's Zytiga (NYSE:JNJ) currently doing well in the metastatic castration resistant prostate cancer space, I believe Yervoy may be able to bring in a peak of $300 million from prostate cancer sales. Also, with pricing at a premium to either Zytiga or Xtandi, physicians may be hesitant to prescribe. Yervoy does have a bright future in lung cancer and melanoma however and could easily surpass $2 billion in revenues at peak sales.
Cetuximab (Erbitux) is a monoclonal antibody (IgG1 Mab) that inhibits EGFR, which is approved for use in head and neck cancer along with K-RAS wild-type metastatic colorectal cancer. Results in phase III head and neck cancer trials showed good efficacy and safety, but PFS and overall survival were not vastly improved. The trial showed that use of Cetuximab increased median overall survival by 2.7 months over chemotherapy alone and progression free survival by 2.3 months over chemotherapy. Sepsis was the only adverse event to occur in more Cetuximab patients than chemotherapy patients during the study. Cetuximab showed that it is an effective and safe first line treatment in either metastatic or recurrent squamous cell carcinoma. Trials also showed that overall survival in metastatic colorectal was similar in Cetuximab and irinotecan, flurouracil, and leucovorin (FOLFORI) group. In wild-type K-RAS tumors, Cetuximab improved PFS and overall survival however. This led to the approval of Cetuximab as a first line treatment in patients with wild-type K-RAS mCRC.
Cetuximab is owned by Eli Lilly (NYSE:LLY) through its purchase of ImClone, however Lilly only receives minimal manufacturing revenue from Bristol-Myers (Lilly received $69.2 million) through its original partnering. Erbitux is not a very high revenue product for Bristol-Myers as they only have the rights for sales in the US. 2012 sales were only $709 million and almost no growth was seen from 2011.
Abatacept was the first in a new class of rheumatoid arthritis treatments that selectively modulates the CD80 or CD86-CD28 co-stimulatory signal required for full T-cell activation. By doing this, it can reduce inflammation and thus improve pain and overall movement in RA patients. Abatacept is a recombinant fusion protein comprising the extracellular domain of human CTLA4 and a fragment of the Fc domain of human IgG1. Abatacept selectively modulates T-cell activation through competitive inhibition, thus reducing the body's tendency to over respond to its own immune system. In clinical trials, the patients response was measured by the American College of Rheumatology's 20 response, meaning that out of 68 joints measured, at least 20% had a reduction in tenderness or swelling. Patients were also measured using the Health Assessment Questionnaire (HAQ) disability index. The ACR 20 response was also used in Humira and many other RA products trials. Efficacy was shown to be slightly better in Orencia than Humira as in Humira's trials, ACR 20 responses were only 47.2% towards the placebo at 28.3%. Abatacept showed an ACR 20 response of 50.4% towards the 19.4% in the placebo group. This shows that patients were further advanced in the Abatacept study and responded slightly better, which would point towards a slight advantage in efficacy of Abatacept. Since Abatacept was infused through IV, adverse events were seen to be 71.4%, with serious infection at 2.3% in both the Abatacept and placebo groups. Discontinuation due to AE's was also the same in both the Abatacept and placebo group, showing that the AE's were mainly due to IV infusion and not the drug. The difference in protocols between the Humira and Orencia trials was that the patients who entered the Orencia trial were second-line patients who did not respond well to anti-TNF products. The majority of patients respond adequately to anti-TNF therapies (as shown by sales figures), which leaves Orencia as an effective second line therapy.
2012 sales were $1.18 billion for Orencia, which was a 28% growth from 2011. Orencia-SC will continue to gain market share and many physicians believe SC will bring in equivalent revenue as IV at peak sales. This means that peak sales will most like be about $2.5 billion, or more than double current revenues. Also, with the results from AMPLE showing that efficacy was similar (patient pain, fatigue and patient global assessment) in both Humira and Orencia, Orencia should begin to take more market share on a quarterly basis. Orencia is slightly cheaper (about $30,000) annually towards that of Humira (About $40,000) and about the same as Rituxan depending on how often Rituxan is infused. Rituxan does have the advantage of less frequent infusions than the other two, however. Until first-line use is advocated, Orencia will remain under $2.5 billion in sales, which does not allow it to compete in the same revenue league as Humira and Rituxan.
Dasatinib, trade name Sprycel, was approved in 2006 for treatment of adults with CP-CML with resistant disease or who were intolerant to prior therapy, including Glivec. This meant that initially it was a second line therapy and still is in CP-CML. In 2010, it was approved for the treatment of Philadelphia chromosome positive chronic phase chronic myeloid leukemia (Ph+ CP-CML), which is a slowly progressing blood and bone marrow disease linked to a genetic abnormality. This abnormality occurs when a translocation occurs between chromosomes 9 and22. A study of 519 patients released in 2010 showed that Dasatinib was more effective and had the same safety profile as Imatinib in CP-CML patients. The results released were as follows: confirmed complete cytogenetic response was higher with Dasatinib than with Imatinib (77% vs. 66%), and the rate of complete cytogenetic response was also higher (83% vs. 72%). Molecular response and response time were also shorter with Dasatinib, which would suggest it is a more effective drug with the same safety profile. NICE, the UK's medicines agency did not recommend Dasatinib for first line use as they did for Glivec. Pricing issues have hurt Sprycel thus far, leaving it mainly as a viable second line option for therapy. This has affected its revenues thus far, leaving it far behind Glivec's worldwide sales. Dasatinib will also need to compete with the 2012 approved Iclusig by Ariad Theraputics (NASDAQ:ARIA).
Glivec, the most popular 1st line therapy, marketed by Novartis (NYSE:NVS), racked up 2012 sales of $4.675 billion worldwide. This is more than 4 times that of Sprycel in 2012, which had sales of $1.019 billion worldwide. Sales growth was 27% in 2012 however, suggesting Sprycel is gaining an increased share in Ph+ CP-CML and should reach $2 billion in sales by 2017 without first-line approval in CP-CML. Glivec also now only has about 70% market share worldwide and with declining Q4 sales, it is slowly eroding, which will open the market up to Iclusig and Sprycel.
Currently Bristol-Myers immuno-Oncology products are not as strong as the likes of Roche, Pfizer, Novartis, AbbVie, and Johnson and Johnson's, but with growing brands, anti-PD1, Elotuzumab, and 18 early phase immuno-Oncology products in its pipeline, Bristol-Myers could turn into an Immuno-Oncology giant. I plan to cover Bristol-Myers pipeline in more depth in my next article, which will be released soon. I believe Bristol-Myers is well diversified with a growing Immuno-Science portfolio on the market and several important brands gaining approvals in late 2012 (Forxiga and Eliquis). I still like Bristol-Myers, but think a market correction will drag it down in the short term to $38. As long term established pharmaceutical companies, I see BMY and RHHBY among the best choices.