Bristol-Myers Squibb May Be Fast-Tracking Its Promising Cancer Drug

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 |  About: Bristol-Myers Squibb Company (BMY)
by: Trefis

Summary

Bristol-Myers Squibb appears to be fast-tracking the development of its breakthrough immuno-oncology drug, Nivolumab.

The Phase 3 clinical trials were earlier expected to run into the second half of 2015.

However, with the recent release of promising data and the early termination of the first batch of Phase 3 trials, the drug may hit the market sooner than expected.

Bristol-Myers Squibb (NYSE:BMY) appears to be fast-tracking the development of its breakthrough immuno-oncology drug, Nivolumab. The Phase 3 clinical trials were earlier expected to run into the second half of 2015. However, with the recent release of promising data and the early termination of the first batch of Phase 3 trials, the drug may hit the market sooner than expected. Immuno-oncology is a promising area of drug development, and has attracted research funding from several big companies. For Bristol-Myers Squibb, the pipeline seems strong, but Nivolumab remains its most promising drug. The company also collaborated with CytomX Therapeutics recently to develop more immuno-oncology drugs. It agreed to make an upfront payment of $50 million, fund the research and make additional payments of up to $298 million on achieving key milestones. That's not a lot, considering the potential reward from making a breakthrough in this multi-billion dollar market

Our price estimate for Bristol-Myers Squibb stands at $36, implying a discount of more than 25% to the market.

The Race Is On For Developing Targeted Therapies For Cancer

The race for immuno-oncology drugs is getting more competitive. According to some estimates, the market could be as big as $35 billion. There is a huge opportunity to profit from successful drugs given that small-molecule R&D productivity has declined during the last decade. Given their focus on biologics and relatively strong immuno-oncology pipelines, Merck (NYSE:MRK), Bristol-Myers Squibb and Roche (OTCQX:RHHBY) stand to gain. We expect a strong focus from each of these companies on both in-house research and development, as well as co-development partnerships, to allow each to stay ahead of the curve and try to tap the market as early as possible.

Nivolumab Is Most Promising For Bristol-Myers Squibb

Bristol's stock soared in 2013, primarily due to bullishness surrounding the company's immuno-oncology drug pipeline. Within this pipeline, a Phase 3 experimental drug called Nivolumab has shown the most promise due to its superior performance in clinical trials, and has even been called the "beginning of the end of cancer" by some analysts. Recently, the company released its first set of data from Phase 3 trials of the drug, which showed significant improvement in terms of survival compared to existing treatments. We currently have a conservative forecast for sales of this drug, keeping in mind the abundant uncertainties involved in securing regulatory approval. However, management seems to be increasingly confident about its eventual success. Moreover, its recently divested diabetes drug portfolio and the decision to stop development in the Hepatitis C and Neuroscience segments has freed up cash to dedicate more resources for cancer drug research.

Disclosure: No positions.

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