Analysts slash Opdivo estimates by billions after trial failure--and hike up Keytruda's, too

Keytruda Opdivo

Bristol-Myers Squibb’s lung cancer trial failure is a few days old by now, but the pharma world is still digesting the news--and new sales estimates, ripple-effect predictions, and other prognostications keep rolling in.

Some analysts see the quick slide in Bristol-Myers shares--the company lost $2.2 billion off its market cap after rolling out the top-line data from its first-line lung cancer trial--as a potential M&A opportunity. But the most immediate effects of that news are new sales predictions for Merck’s Keytruda, which delivered surprisingly positive top-line results from its first-line lung cancer trial earlier this year, and BMS’ Opdivo, which yielded its own stunner Friday with its Checkmate-026 trial failure.

“We fully expect the market momentum to favor Merck’s Keytruda over the next several months,” Leerink Partners analyst Seamus Fernandez said in a Sunday investor note. “Simply put, Bristol-Myers has a failed first-line study, while Merck has a big win,” he said. 

That’s the prevailing view, and new numbers show it. Bernstein & Co., for instance, hiked its peak estimates for Keytruda by $2.5 billion, with about $1 billion of that boost coming in 2017, the rest in 2018. By 2025, Keytruda should be selling to the tune of $7.8 billion, up from $5.35 billion.

That’s partly because analyst Tim Anderson expects Keytruda’s first-line success to spill over into the second-line setting, where Opdivo now has a big lead. “As Keytruda becomes the gold standard in 1L disease, prescribers will become much more familiar with it than they are today, creating a positive “halo” effect that should translate into greater Keytruda usage in 2L disease,” Anderson wrote in an Aug. 9 investor note.

For Opdivo, Bernstein expects sales to decline by a slightly bigger margin. The firm now sees $10.3 billion in 2025 sales, down from $13.3 billion.

Fernandez expects Opdivo to keep growing globally over the next year to 18 months, but U.S. sales will stall, he says, as Keytruda takes market share. 

As Credit Suisse analyst Vamil Divan points out, Bristol-Myers is holding out hope for Opdivo monotherapy in patients with PD-L1 levels of 50% or more--a level playing field with Keytruda--but the Merck drug will likely have an FDA indication, whereas Opdivo will not. For BMS, there’s also the upside of combination therapies, including its own in-house Opdivo-plus-Yervoy combo, which delivered solid data at the American Society of Clinical Oncology meeting in June. Then again, pivotal data on that combo in lung cancer isn’t scheduled till 2018, and that means Keytruda will have enjoyed a long period in the first-line lead.

And some analysts think the Opdivo-Yervoy combo trial--Checkmate-227--is less likely to succeed now. “[W]e have less confidence that BMS has ‘threaded the needle’ to demonstrate a compelling profile for its Opdivo+Yervoy combination in first-line lung cancer,” Morgan Stanley’s David Risinger wrote Friday.

Plus, AstraZeneca will be pressing ahead with its own similar cocktail--a PD-L1/CTLA-4 combination of its durvalumab candidate and tremelemumab--as will Roche, which is studying its newly approved PD-L1 med Tecentriq in combo lung cancer trials. “The disruption of BMS’ current I-O dominance clearly offers an opportunity for Roche and AstraZeneca if their combination trials show efficacy,” Divan pointed out.

That could be a big “if,” however, Anderson says. “One question we have is this: if it is so clear that PDx/CTLA4 combination trials are going to be positive, why aren't Roche, Merck, Pfizer, and others ‘defensively’ running PDx/Yervoy combination studies of their own, just in case?” he asks.

Credit Suisse pegs Opdivo sales in the same neighborhood as Bernstein’s estimates: $8.5 billion in 2020 and more than $10 billion in 2023.

The Checkmate-026 failure might make an even bigger difference to Bristol-Myers, too. Both Divan and Fernandez suggest that potential buyers might see a chance. “Should share weakness continue, BMS could become an opportunistic M&A target,” Fernandez said in a Sunday investor note. And Divan says that his firm’s sources are raising the idea. “Conversations with investors lead us to wonder if BMS may be a more attractive takeout target now,” Divan wrote.

But don’t expect anything fast, he cautioned: “[W]e think potential buyers would want to wait and see” how the company’s immuno-oncology franchise sorts out before making a move.

Special Report: Top 20 drugs by 2020 - Opdivo - Keytruda

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