Seeking Alpha
Profile| Send Message|
( followers)  

Bristol-Myers (NYSE: BMY) recently reported its Q1 2013 financial results with a 27% decline in pharmaceutical revenues towards Q1 2012, but with a 10% increase excluding Avapro and Plavix. The Eliquis launch has also been slightly disappointing, with only $22 million in revenues during the 1st quarter. While overall sales declined YOY due to their key patent losses, international sales slightly increased along with close to a 20% increase in their oncology portfolio. Continued weakness will be seen in Abilify until its patent loss in 2015 as the patent loss of Zyprexa has flooded the market with cheaper generic alternatives. Yervoy's sales continue to grow at a rapid rate (49% Q1 YOY growth) along with that of Orencia and Sprycel, however. The PPS (price per share) took a small hit on the day of the earnings release, and has slightly declined since to just north of $39.50. I believe it will stay in this region of $35-41 for another two to three quarters (barring any unforeseen macroeconomic events), and slow growth will be seen as their new products gain market share. I would now classify Bristol-Myers as a hold since BMY has exceeded my initial expectations from January and has risen north of $40. The addition of Eliquis and Forxiga will not generate significant 2013 income, but by 2015, could begin to drive growth and potentially each bring in $500 million for BMY annually (note each product is partnered 50/50) and replace declining revenues from Abilify. I believe that Bristol-Myers is currently becoming a smarter pharmaceutical company that will no longer rely on sales from one product, but that of numerous brands in different therapeutic areas. In this article, I will focus on their future in Immuno-Oncology and how their pipeline candidates, mainly Anti-PD-1, will potentially change the future of cancer treatment.

Oncology Market

Cancer is an ever increasing problem throughout the world, with new cases doubling on an annual basis by 2025. In 2009, the market was about $50 billion, with an expected market of over $110 billion by the end of 2013. The FDA also approved 13 oncology products in 2012, which was one third of all approved NME's. Oncology appears to be the wave of the future with the FDA as approvals are becoming easier and easier to push through. Much of this is because it is very hard to deny approval of a drug when lives depend on their availability. In 2012, oncology revenues were lead by Roche (PINK: OTCQX:RHHBY), who alone brought in revenues of $22.5 billion in this therapeutic area. Bristol-Myers oncology revenues were about 10% of Roche's in 2012 with Yervoy, Erbitux, and Sprycel, but their pipeline may be the strongest oncology pipeline we have seen to date. Nivolumab (Anti-PD-1), Elotuzumab, and expanded use of Yervoy will drive growth in the next few years, and in the long term, more than a dozen molecules are being in the IND/Phase I processes.

Nivolumab (Anti-PD-1)

BMS-936558 (now known as nivolumab), is a fully human IgG4-blocking monoclonal antibody directed against PD-1. It is Bristol-Myers strongest pipeline candidate and every company conference call seems to revolve around its developments. The FDA has granted Fast Track designation for nivolumab in three tumor types: non-small-cell lung cancer, renal cell carcinoma and advanced melanoma, which may allow them to bring it to market by 2014. Bristol-Myers is partnered with Ono Pharmaceuticals on Anti-PD-1, but Ono has granted Bristol-Myers Squibb rights to develop and commercialize Anti-PD-1 worldwide, except in Japan, Korea and Taiwan. Ono has retained all rights in these areas. Phase I trial readouts were in 2012 and results were promising in several different tumor types. 296 patients with advanced solid tumors were enrolled in phase I, which included melanoma (104), NSCLC (122), renal-cell cancer (RCC) (34), castration-resistant prostate cancer (17) and colorectal cancer (CRC) (19). Phase I trials showed long term response, along with grade 3-4 AEs in 41 of 296 pts. The majority of patients were heavily pretreated; 47% of which had received at least three prior regimens, meaning that they were further advanced and harder to treat. Fifteen of 296 patients (5%) discontinued treatment due to treatment related AEs. The most common AEs, regardless of causality, were fatigue, decreased appetite, diarrhea, nausea, cough, dyspnea, constipation, vomiting, rash, pyrexia, and headache. Another positive factor in terms of efficacy seen was antitumor activity, which was observed at all doses tested. As previously mentioned, many of these patients were pre-treated, meaning that they would be further advanced and less responsive to treatments than those who are treatment-naïve.

The rationale for use of a PD-1inhibitor comes from the fact that PD-1 interacts with the ligands PD-L1 (B7-H1) and PD-L2 (B7-DC), which downregulate T-Cell proliferation, and alter production of cytokines. This inhibits the immune response and allows tumors to grow uncontrollably. PD-1 and CTLA-4 are similar in structure and are both expressed on activated T cells (CTLA-4 is the target of Yervoy). PD-1 has also been proven to be expressed on B cells, which suggests that PD-1's role in immune regulation is more widespread than that of CTLA-4. Following the initial T-cell activation signal, both molecules interact with ligands on APCs to stop the resulting immune response. Programmed death 1 (PD-1) is a key immune checkpoint receptor expressed by activated T cells, and it mediates immunosuppression.

Anti-PD-1 in Lung Cancer

Lung cancer is the leading cause of cancer-related mortality worldwide, with non-small-cell lung cancer (NSCLC) accounting for approximately 85% of all cases. Most patients with NSCLC are diagnosed at an advanced stage and have a poor prognosis, with a 5-year survival rate of <5%. Revenues in advanced lung cancer alone could be $6 billion worldwide according to Barclays Capital. NSCLC's market space is expected be worth about $10 billion by 2018, with a current need for a first-line product that provides both safety and efficacy. Increased safety over tyrosine kinase inhibitors (Avastin) and the potential of a dual therapy with Yervoy will bring multi-billion dollar revenues in squamous cell lung cancer, and allow Bristol-Myers to surpass Roche in this space. Also, with nivolumab's safety profile, there is potential that treatment could start before patients are in advanced stages, thus increasing revenues further. From phase I trials, efficacy was seen in patients with NSCLC, as 14 objective responses were observed across all patients (18%). Objective responses were observed across non-small-cell histologic types: in 6 of 18 patients (33%) with squamous tumors, 7 of 56 (12%) with nonsquamous tumors, and 1 of 2 with tumors of unknown type. The read out on Bristol-Myers 100 patient single-arm phase II trial is expected to yield results in early 2014, along with their Phase III trial vs. docetaxel in the refractory setting that will be completed in August 2014. With the potential for a late 2014 launch, Anti-PD-1 in the lung cancer setting is not too far away and should help provide additional 2015 revenues along with Eliquis and Forxiga.

Anti-PD-1 in Renal Cell Cancer

Renal cell cancer is also a moderately untapped market and is expected to be worth north of $5 billion by 2016. Compounded annual growth is in the high single digits to low double digits with several approved products treating the condition. Currently, Pfizer's Sutent, GSK's Votrient and Novartis' Afinitor compete with Onyx/Bayer's Nexavar in this space. Aveo Pharmaceuticals (NASDAQ: AVEO) tivozanib could also join this group in late 2013/early 2014. While this may seem to be a crowded area from the number of approved products, a large percentage of patients with localized and locally advanced disease are not currently treated with drug therapies and are not cured by surgery alone. This provides a large group of patients and untapped potential for products that can slow the progression of advanced RCC. Anti-PD-1 has shown this ability in certain advanced RCC patients, which is quite an advance, as for decades, patients with stage III/IV have not had a product that improves their 5 year survival. Among patients with renal-cell cancer, objective responses occurred in 4 of 17 patients (24%) treated with a dose of 1.0 mg per kilogram and 5 of 16 (31%) treated with 10.0 mg per kilogram. Based on early results, I could see nivolumab taking about 10% of the RCC market, this bringing in about $700 million at peak sales.

Anti-PD-1 in Melanoma

Nivolumab is currently being tested in 3 phase III melanoma programs along with a phase II trial (not yet enrolling) in combination with ipilimumab. Rapid growth is also expected in melanoma therapeutics as few products are currently available to effectively treat the condition. The rate of incidence is expected to increase by about 10% by 2020 as artificial tanning becomes more popular in the Caucasian population. The therapeutics market is expected to increase to close to $3 billion according to GlobalData from about $800 million in 2011. Part of this growth will be due to the increased use of ipilimumab (Yervoy), Sylatron, and Zelboraf, but an unmet need still exists for a safe product. Zelboraf and ipilimumab (Yervoy) have been shown to increase PFS and OS towards other therapies in the metastatic melanoma market, but both are still associated with high SAE incidence rates. Chemotherapies have also been shown to be ineffective in many melanoma patients and response rates, PFS, and OS to date have been extremely low. Sylatron's (NYSE: MRK) approval in 2011 has provided a new treatment option for melanoma patients in the adjuvant setting, which was the first in fifteen years, but with a safety profile shown to cause an increase life-threatening or fatal neuropsychiatric reactions, its use is not preferable. This leaves a large opening in melanoma therapeutics that could potentially be filled by nivolumab. Nivolumab will face stiff pipeline competition from Merck's lambrolizumab, which recently received breakthrough therapy status, and several other Phase II/III products. Not to be overlooked is the potential for dual therapy use of nivolumab with ipilimumab as it will allow Bristol-Myers to cash in on each potential patient with a therapy that could potentially be twice as expensive as that of ipilimumab alone.

In patients with melanoma, during nivolumab's Phase I trial, 26 objective responses were observed at doses ranging from 0.1 to 10.0 mg per kilogram, with response rates ranging from 19 to 41% per dose level. At a dose of 3.0 mg per kilogram, objective responses were noted 41% of patients. The objective response rate of 33% is far better than ipilimumab's 10% -15% for a similar metastatic melanoma patient population, and with slightly less severe overall side-effects.


Elotuzumab (HuLuc63), is a monoclonal antibody that binds to CS-1 glycoprotein and causes apoptosis in multiple myeloma cells. The activity of Elotuzumab appears to induce anti-tumor effects mainly through antibody-dependent cellular cytotoxicity (OTCPK:ADCC) activity. If launched, it will be the first fully human monoclonal antibody used in the treatment of MM. Bristol-Myers originally purchased the licensing off of PDL BioPharma in 2008, who spun off their biotech operations into Facet Biotech, which was subsequently purchased by Abbott, who has since spun off to AbbVie (NYSE: ABBV). Even in 2008, the potential was seen with this molecule as $30 million was paid up front with Bristol-Myers paying 80% of the development costs, up to $480 million in development costs, $200 million in sales milestones, and a 50/50 split on US sales. In the US in 2010 the prevalence of multiple myeloma was 64,615, with close to 22,000 additional patients diagnosed on an annual basis. In Europe, the total population is close to 80,000 at any given point. This is a quite large market as drug therapy is the preferred choice of therapy since myeloma cells are most sensitive to drug therapies. This therapeutic market is expected to be worth close to a $6 billion market by 2018. The approved products and competitors of elotuzumab in this area are Velcade, which is marketed by Takeda Pharmaceuticals (PINK: OTCPK:TKPYY), Revlimid, marketed by Celgene (NASDAQ: CELG), and Thalomid, also marketed by Celgene. In trials thus far, elotuzumab has shown a higher overall response than Actimid (Celgene), Carfilzomib (Onyx), Panobinostat, Zolinza, and Perifosine (Keryx). Phase III trials currently are underway for first-line treatment (ELOQUENT-1) or treatment in refractory patients in combination with Revlimid (ELOQUENT-2). In patients treated with elotuzumab 20 mg/kg plus lenalidomide and low-dose dexamethasone, median PFS was 18.6 months and ORR was 76%. In the 10 mg/kg group, median PFS was not reached at the time of ASH, and the ORR was 92%. This shows optimal dosing is lower than 20 mg/kg and that the 10 mg/kg group's PFS was better than 21months. Safety is also in line with Revlimid, which showed Grade 3-4 events in 80% of patients (78% in Elotuzumab).

Bristol-Myers Future

2013 will be a make or break year for nivolumab and Bristol-Myers in general as readouts are coming from numerous nivolumab trials. In the next 6 months, we should see Ipilimumab+vemurafenib safety/feasibility data, 2nd line Ipilimumab prostate cancer data, 5 Year Ipilimumab data in melanoma patients, along with additional Anti:PD-1 PI/II data on multiple tumor types and biomarker data, which will show if Anti-PD1 can use biomarkers to more successfully target certain tumors. Also, at ASCO, dosing data is expected for Ipilimumab+Anti-PD-1. Elotuzumab readouts will also be presented at various medical meetings during this time.

I believe that nivolumab (Anti-PD-1) has the potential to be one of the highest grossing products ever to hit the market. Early studies have shown that its efficacy and safety is favorable in several indications, meaning that it could have more widespread use than that of Roche's Avastin. It should be noted that the results we have seen to date were from early clinical trials and larger trials may yield disappointing results, but the expectations currently are very high. At ASCO this year, we will learn more about its potential as long term results (survival data and response rates) from the ongoing Phase Ib study in RCC, melanoma, NSCLC, and mCRPC will be released. Also, data from the combination of Yervoy + anti-PD-1 study should be released. At this time, we will gain a better understanding of study results and should be able to make a more accurate assessment of Anti-PD-1's financial potential. With the potential approval of nivolumab in 2014 and the launch of both Eliquis and Forxiga, I forecast that Bristol-Myers earnings will reach about $19.5 billion in 2016. The loss of Abilify's patent should be negated by early nivolumab sales along with expanding revenues from Yervoy, Orencia, Eliquis, and Forxiga. For these reasons, I see Bristol-Myers future as very bright and the recent loss of revenues should only be seen as a short term hindrance.

Disclosure: I am long MRK. 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.

Source: Bristol-Myers Has The Future Of Oncology Therapies