There has been a lot of activity at Bristol-Myers Squibb (BMY) in the past week. However, Bristol-Myers Squibb looks pretty average at the moment, partly due to its mediocre performance, and partly due to the rock star performances of some competitors.
Bristol-Myers Squibb's type 2 diabetes drug, Dapagliflozin, has met with positive opinions by the European Union. This drug works by blocking the reabsorption of glucose in the kidney, causing blood glucose to be eliminated through urine. This is exceptional because it works independent of insulin. Additionally, this is the first drug of its kind, and thus would be the first on the market.
And for the bad news, on Jan. 19, 2012, Dapagliflozin received a complete response letter from the FDA. This will be a large hurdle to overcome, as the FDA rejected the drug due to higher-than-normal rates of breast and bladder cancer in those taking the drug. Additionally, the FDA was concerned about liver toxicity.
Ultimately, I believe this drug will make its way into the market. Bristol-Myers Squibb partnered with AstraZeneca (AZN) to develop the drug, and I cannot imagine both companies will write off the costs of developing Dapagliflozin. This is especially true given the high rates of type 2 diabetes in Europe and the United States. I would continue to watch the development before investing.
Another treatment that is having a bit of trouble is the Hepatitis C Virus treatment that Bristol-Myers Squibb is developing. Recently, the company announced that the drug achieved sustained response in 77% in patients that are difficult to treat. This is great news for patients, as they are closer to having an effective treatment. It is also good news for Bristol-Myers Squibb as it will likely be able to grab a large share of the multi-billion dollar Hepatitis C treatment market.
The Hepatitis C market is currently untapped with many companies frantically developing drugs in an attempt to grab a share of the profits. Unfortunately for Bristol-Myers Squibb, Abbott Laboratories (ABT) has two Hepatitis C drugs in development, both of which are over 90% effective.
The development of both the Hepatitis C and the type 2 diabetes treatments tell me one thing. Bristol-Myers Squibb will make money. The question is when. If its type 2 diabetes treatment gets bogged down in many more trials, I expect its stock price to suffer.
Similarly, the Hepatitis C treatment will, without a doubt, make Bristol-Myers Squibb a hefty profit. But how much will it make relative to its competition? My guess is that Bristol-Myers Squibb will look average in comparison to this competition. I can hardly say this gives me confidence to invest.
To add to the bad news, Bristol-Myers Squibb was just rejected in its bid to purchase Amylin Pharmaceuticals (AMLN). Adding insult to injury, Amylin is now seeking out other potential buyers. Amylin created diabetes drugs Bydureon and Byette. Bristol-Myers Squibb could really have used this expertise in relation to its own type 2 diabetes treatment. Now, it can only hope that none of its major competition acquires Amylin, unless it is AstraZeneca, which is its partner on the diabetes drug.
To cap off the bad news, there are new reports that the patents on Plavix are set to expire this year, and Bristol-Myers Squibb does not have a replacement in line. Since Plavix is one of the top 10 earning drugs on the market, I fully expect a generic will hit the market as soon as possible. Unless it can get some other high earning drugs on the market, the introduction of a generic will hit its bottom line.
Bristol-Myers Squibb's competition has been equally as busy. First, we have Abbott Laboratories, which has been on top of its game as of late. With the approval of its XIENCE PRIME drug in Japan, Abbott might have found its cash cow. It also just got FDA approval to use its iFS Advanced Femtosecond Laser to create curved incisions needed in corneal surgery. If you are watching Bristol-Myers Squibb, I would recommend keeping an eye on Abbott Laboratories as well. It is likely a better short- and long-term investment.
It will also face stiff competition from GlaxoSmithKline (GSK). GlaxoSmithKline is growing a bit differently than Abbott Laboratories, as it is using both new treatments and acquisitions to fill holes in their portfolio. First, GlaxoSmithKline is attempting to acquire Human Genome Sciences (NGSI) after having worked together for over 20 years.
Also, GlaxoSmithKline just released positive results in a late-stage study for a smoker's cough treatment. Experts are estimating this development will be highly competitive with treatments already on the market. This treatment shows superior lung function compared to other drugs on the market so far, a promising sign for the company moving forward.
It is this drive that separates Abbott Laboratories and GlaxoSmithKline from Bristol-Myers Squibb. Whereas Bristol-Myers Squibb is struggling to enter a market with one drug, both Abbott Laboratories and GlaxoSmithKline are attempting to enter the market multiple times with multiple superior drugs. Two of these three companies have a strong possibility of cornering the market and Bristol-Myers Squibb is not one of them.
This past week has certainly been mediocre for Bristol-Myers Squibb, but don't count it out. It has deep pockets and has developed some extraordinary drugs in the past. But, if you are looking for a safe investment, keep looking. Bristol-Myers Squibb will need to work out a few large problems before it returns to the profitability of its Plavix drug.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.