There’s no denying Bristol-Myers Squibb’s Opdivo had a tough week. But the way one analyst sees it, investors are overreacting.
As Goldman Sachs’ Jami Rubin pointed out in a Monday note to clients, the New Jersey drugmaker saw $5 billion lopped off its market cap, thanks to a couple of key events. First, archrival Merck & Co. rolled out phase 3 Keytruda combination data in kidney cancer much earlier than expected, setting up Bristol’s own combo—of PD-1 agent Opdivo and fellow checkpoint inhibitor Yervoy—to face competition in previously untreated patients.
And the very next day, Bristol disclosed both an FDA delay for its immuno-oncology duo in previously untreated lung cancer and a new survival analysis that called the utility of a new biomarker, tumor mutational burden—which is key to BMS’ hopes for lung cancer—into question.
The analysis raised “questions about the predictive value of TMB,” Rubin wrote, with Credit Suisse’s Vamil Divan writing in his own note that it led his team “to wonder why regulators would approve the regimen” under Bristol-Myers' current filing for a new approval in lung cancer.
That said, the way Rubin sees it, BMS’ current valuation “does not contain any contribution to Opdivo/Yervoy” from either of those disease settings, “which we view as overly punitive,” she wrote.
“Investors have assumed failure” for the company in first-line lung cancer, and “we believe the market does not give any credit for use in first-line renal”—an opportunity Rubin pegs at $1 billion.
Industry watchers once assumed Bristol would take the immuno-oncology crown with Opdivo, but thanks to some high-profile trial misses—notably in the closely watched lung cancer field—that’s no longer the case.
“It has been very disappointing to witness Bristol-Myers' once dominant position in IO cede to a potentially distant second,” Rubin wrote, adding that “BMS’ pain is Merck's gain.”
But there’s still room for the stock to rebound, she contended, writing that, “Upcoming lung trials (if positive)” could move shares “on still a relatively small base.”