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 Bristol shares fell as much as 2.7 percent and closed off 1 percent
after reporting sales of Opdivo, a therapy that helps the immune
system fight cancer, totaled $40 million in the first quarter of the
year. That was below Wall Street forecasts of $50 million.
Merck said its Keytruda treatment had quarterly sales of $83
million, topping Wall Street estimates of about $70 million, helped
by early compassionate use patients converting to paying customers
following approval.
"When investors saw Opdivo's number was below Keytruda's, that
caused concern," said John Boris, an analyst with Suntrust Robinson
Humphrey. Merck shares closed up 5 percent, though the gains were
mostly attributed to positive new safety data on its top-selling
Januvia diabetes treatment.
Boris and other industry analysts said the early sales data
represent only the first skirmish in a long battle for market share
between Bristol-Myers and Merck. Some expect both drugs will
eventually generate billions of dollars in annual sales,
particularly if proven effective against other forms of cancer.
In addition, excitement over Bristol-Myers' cancer treatments have
pushed shares to trade at 28.5 times expected 2016 per share
earnings, Boris said. That compares with a multiple of 15.1 for
Merck and 17.6 for the pharmaceutical sector.
"Based on price per fundamentals, we like the value of Merck versus
Bristol at the moment," said Les Funtleyder, healthcare portfolio
manager for ESquared Asset Management, which currently holds Merck
but not Bristol shares.
Ori Hershkovitz, a managing partner at Nexthera Capital in New York,
said Bristol-Myers is trading more like a high-flying biotech.
"The minute biotech gets pummeled, Bristol bears the brunt," he
said, noting biotech stocks have retreated sharply in recent weeks
on fears they were overly inflated.
EARLY ADVANTAGE
Opdivo was approved in December to treat advanced melanoma. In
March, it received clearance to treat a common form of lung cancer,
giving Bristol an early-mover advantage in a much larger market.
Keytruda has been approved for advanced melanoma since September and
awaits regulatory approval in lung cancer.
Both drugs work by blocking a protein called PD-1, helping the
immune system recognize and destroy cancer cells. Roche Holding AG,
AstraZeneca Plc and Pfizer Inc are also developing similar
treatments.
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Boris forecast Opdivo annual sales reaching $7 billion by 2020 and
said Tuesday's weakness in Bristol shares represents a buying
opportunity. Opdivo has been shown to prolong survival in melanoma
and lung cancer, according to clinical trial data.
Keytruda has not yet demonstrated a survival benefit but is expected
to do so in coming trials. Boris predicted it will capture annual
sales of $3.7 billion by 2020.
Bristol Chief Scientific Officer Francis Cuss told analysts on
Tuesday that strong data on Opdivo along with the U.S. approvals in
lung cancer and melanoma and expected European approval "really puts
us in a very strong competitive position."
The company recently reported strong results from a combination of
Opdivo and its older immunotherapy Yervoy in advanced melanoma. It
plans to apply for approval of the combination therapy by mid-year.
Merck head of global human health, Adam Schecter, told analysts that
the market will be big enough to handle several competitors, "so I
don't think it should be looked at as one company versus the other."
Pfizer is racing to catch up with Merck and Bristol-Myers, by
beginning late-stage trials this year of its PD-1 inhibitor and
conducting trials of four other immuno-oncology drugs.
PD-1 treatments "will be the workhorses for the foreseeable future,
but they will need to be added to standard therapies or to (other)
immuno-oncology treatments," Pfizer Chief Executive Ian Read said in
an interview. "That's where the market will be, and we will be well
positioned with those combination agents."
(Reporting by Ransdell Pierson and Bill Berkrot, editing by Michele
Gershberg and Andrew Hay)
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