Bristol-Myers Squibb (BMY) recently declared its third-quarter results; its revenue grew by 9% year over year to $4.1 billion, which was mainly driven by the double digit growth in its drugs, Yervoy, Orencia, and Sprycel. Despite the patent expiration of its two blockbuster drugs, Plavix and Avapro, and the stiff competition from other generic drug manufacturers, the company was able post superior results.
Orencia, a rheumatoid arthritis treatment, showed strong year-over-year sales growth of 22% to $375 million, and Sprycel grew by 20% to $316 million. The most significant performance was by Yervoy, which was led by its approval for treatment of a new type of melanoma. Its sales grew by 33% year over year to $238 million. These drugs helped Bristol-Myers to earn $692 million, or $.42 per share, compared to loss of $711 million, or $0.43 per share, a year ago. To enhance its future earnings, the company commenced various trial phases for Yervoy in combination with other drugs to treat other forms of cancer also.
Positive results for Yervoy
Yervoy, Bristol-Myers' melanoma drug, enhances the patient's immune system to better fight cancer cells. It was also able to shrink tumors in more than 10% of patients, increasing their survival rate. On September 28, 2013, according to the research conducted by the Stephan Hodi and Dana Farber Cancer Institute, Yervoy was able to increase the survival rate by around 10 years for the cancer patients. Twelve trials on 1,800 patients showed that 22% survived for three years after treatment and 17% survived for seven years. The patients survived with the longest life of 9.9 year after the treatment.
By looking at the positive results of Yervoy in increasing the survival rate and its superior efficacy, we expect it will offset the revenue loss from the Plavix and Avapr patent expiration and continue to drive the company's earnings higher. Bristol-Myers is also testing the efficacy of Yervoy in treating other forms of cancer. The positive result by Yervoy may provide the opportunity for Bristol-Myers to gain the maximum advantage in the cancer drugs market.
Tumor Immuno-Oncology Studies
Trial phase status
Post-docetaxel, castrate-resistant prostate
Phase III (043) missed primary endpoint. Abstract at ECC on September 28.
Phase III (095). Data by 2015, though possibly earlier depending on event rate. Same dose (10mg/kg) as 043 study.
Yervoy (ipilimumab) + nivolumab
Untreated advanced melanoma
CheckMate-067. Studying Yervoy and nivolumab monotherapy and combination. Data by 2016 or 2017.
Nivolumab monotherapy or
nivolumab + Yervoy
Triple-negative breast, gastric, pancreatic, small cell lung, adenocarcinoma
Phase I/II open label, n=160, to assess ORR. Completion expected in 1H15.
Nivolumab +Yervoy (ipilimumab)
Untreated advanced melanoma
CheckMate-064. Phase II studying Yervoy and nivolumab combination. Data by 2014.
Nivolumab +Yervoy (ipilimumab)
Untreated advanced melanoma
CheckMate-069. Studying Yervoy and nivolumab monotherapy and combination. Completion in 1H15.
Nivolumab + Sutent/Votrient or nivolumab + Yervoy
Renal cell carcinoma
CheckMate-016. Open label, 72 patients. Phase I data by 2015
Lirilumab (anti-KIR)+ Yervoy
NSCLC, castrate-resistant prostate, melanoma
Phase I dosing study in 125 patients. Data in 2H15.
Lirilumab (anti-KIR)+ nivolumab
NSCLC, melanoma, renal, colorectal, ovarian
Phase I dosing study in 150 patients. Data in 2H15.
Denenicokin (IL-21) + Yervoy
Unresectable Stage III/IV Advanced Melanoma
Phase I safety study in 150 patients. Data in 1H15.
In the phase III trial, Yervoy was not able to meet the primary endpoints, however anti-tumor activity was able to meet some efficacy endpoints, including progression free-survival. With some positive end-points, the company is optimistic on the other Yervoy trial phase results and expects it will meet all end-points with superior efficacy.
The company is expecting the positive result of its other phase III trial of chemotherapy-naive prostate. The result of this phase is expected by 2015. We believe it may overcome the drawback of the earlier prostate trial and present better results in the future.
Bristol-Myers is also evaluating the results by combining Yervoy with its anti-PD-1 drug, nivolumab, for treating various forms of cancers and untreated advanced melanoma. The combination of these two drugs presented the higher efficacy; it was able to enhance the survival rate in 82% of 53 patients, higher than Yervoy alone.
According to Alexander Eggermont, director general of the Gustave Roussy Institute in France,
"Adding anti-PD-1 drugs could double or triple survival results and make advanced skin cancer a curable disease for more than half of patients in the next five to 10 years."
Most of the trials are in either phase II or phase III, and their results are expected to be declared in 2014 and 2015. The analysts predict that this drug will generate sales of $1.1 billion this year and may become Bristol-Myers' top-selling medicine by 2016. We also believe that the positive result may enhance Bristol-Myers presence in the cancer drugs market and create strong future growth opportunities for it. Additionally, the approval for any of its combinational therapy may generate higher revenue than the expected figures, as Yervoy has already achieved the sales of $700 million year-to-date.
Future prospects for Yervoy
Yervoy was approved as the first-line treatment in the U.S. in 2011, and it is the first drug to extend life for melanoma patients. Yervoy 3mg/kg monotherapy is currently approved in 40 countries to treat metastatic melanoma. Additionally, Yervoy is approved as the second-line treatment in Europe. And in September, the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, recommended Yervoy as the first-line treatment of chemotherapy-naive advanced melanoma patients. The European Commission will review CHMP's positive opinion for its approval in the European Union.
Yervoy cost around $30,000 per dose and $120,000 for a four-dose course of treatment. There are around 160,000 people globally and around 68,000 Americans diagnosed with melanoma every year. According to some analysts, Yervoy may generate sales of around $1.7 billion in the U.S. by 2015. We agree with the analysts, and if the European regulatory approves Yervoy as the first-line treatment, then we can expect Yervoy will generate higher revenue and contribute significantly to Bristol-Myers' overall revenue.
Its competitors Merck (MRK) and Roche Holding (OTCQX:RHHBY) are developing cancer drugs in similar combination with PD-1 drugs. Merck's Lambrolizumab, was able to shrink tumor cells in 38% of advance melanoma patients. Merck believes that the ongoing phase II trial for melanoma with the population size of 500 patients may demonstrate positive data to win regulatory approval faster. Merck's Lambrolizumab has been given a 'breakthrough treatment' designation by the FDA. The breakthrough treatment is intended to expedite the development and review of drugs that can be used alone or in combination to treat fatal diseases. This may be severe competition for Bristol-Myers. Further, Merck is expected to move Lambrolizumab into the next phase in the third quarter of this year.
On the other hand, Roche is the leading contender in this class of cancer drugs with MPDL3280A , which was able to reduce the tumor in 26% of smokers in its trial phase. The infusion given once every three weeks helps block PD-L1, a protein that prevents the immune system from attacking cancer cells. Roche commenced the late-stage study for MPDL3280A and expects positive results in its trial phase, which will enable it to receive marketing approval for its drug.
Additionally, Bristol-Myers is also facing stiff competition from GlaxoSmithKline's (GSK) Tafinlar and Mekinist; in September 2013, the FDA granted the priority review status for this combination for treating metastatic melanoma. The FDA approved both drugs earlier this year, and their combination is expected for review in early January 2014.
After posting strong third-quarter results, Bristol-Myers is more optimistic on its drug pipeline and is anticipating a positive response in the trial phase. The combination of its blockbuster Yervoy with its new drug Nivolumab, which has posted superior results in the trial phase, is expected to drive its future revenue and enhance its earnings. The company reaffirmed its EPS guidance to be in range $1.41-$1.49. It's currently trailing at a price-to-earning, or PE, multiple of 59.55 and a forward PE of 24.88, representing higher growth potential for the company.
The stock reached its 52-week high on the day of its third quarter results and generated the return of more than 59% year-to-date for its investors. By evaluating its EPS guidance and PE multiple, we expect more upside in its stock price in the coming quarters.
Additional disclosure: Fusion Research is a team of equity analysts. This article was written by Satya Prakash, one of our research analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.