Bristol Myers downgraded at Raymond James after Turning Point acquisition

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Raymond James has lowered its rating on Bristol Myers Squibb (NYSE:BMY) to Market Perform from Outperform on Friday after the pharma giant agreed to acquire the clinical-stage oncology biotech Turning Point Therapeutics (TPTX) for $4.1B in cash.

The analyst Dane Leone highlights the potentially limited market opportunity for Turning Point’s (TPTX) lead drug candidate, repotrectinib, a tyrosine kinase inhibitor targeted at ROS1 and NTRK oncogenic drivers of non-small cell lung cancer (NSCLC).

Citing a discussion on targeted therapies for lung cancer, Leone points to the drug’s potential to become a first-line option for ROS1+ NSCLC, but with a limited market opportunity as existing therapies generate $500M-600M in total annually.

With Bristol Myers (BMY) expecting U.S. approval for the drug in 2H 2023, the company will have to educate oncologists that continue to prescribe Xalkori, a rival medication from Pfizer, the analyst argues, noting that the issues with high rates of dizziness linked to repotrectinib remain uncertain.

Leone considers the transaction as a positive sign that Bristol Myers (BMY) is starting to capitalize on the depressed valuations of SMID cap biopharma. However, “we do not find the transaction itself as reason to change our valuation outlook,” he added, pulling the price target on the stock.

Read: Wedbush highlighted possible biotech targets after Pfizer (PFE) agreed to acquire Biohaven Pharmaceutical (BHVN) for more than $11B last month.