Yesterday, Merck (NYSE:MRK) reported data from Keytruda in combo with chemotherapy for patients with non-small cell lung cancer (NSCLC). The data was positive for Merck and negative for Bristol-Myers Squibb (NYSE:BMY), which continues to lose market share.
To put into context, in 2017, BMY’s Opdivo generated sales of $2.5 billion in NSCLC in the U.S. while Merck’s Keytruda generated $1.1 billion in U.S. sales for the same indication. This competitive picture is expected to change with U.S. Keytruda sales in NSCLC expected to reach $3.0 billion in 2022 (24% CAGR) while Opdivo U.S. sales are expected to remain roughly flat, reaching $2.8 billion in 2022 (3% CAGR) according to EvaluatePharma.
BMO analyst Alex Arfaei very much agrees, noting that Bristol will actually face significant headwinds in 2019. The analyst wrote, “Opdivo is the most important growth driver and we estimate ~45% of its sales come from lung cancer, almost all second-line (2L). This market will shrink as more patients are treated by MRK’s Keytruda in 1L following compelling KN-189 results. The rate of this shrinkage is unclear, but we do expect very strong uptake of Keytruda. Bristol needs competitive data 1L-lung data to offset the 2L decline, and the prospects for that are unclear.”
“We highly doubt Opdivo + Yervoy, or Opdivo + chemo could produce better survival results vs. KN-189; and it is survival that matters above all. If the 1L results are on par or inferior vs. Keytruda, Bristol will likely gain much lower share given that it is still at least 1.5 years away (like Tecentriq in 2L). We believe the trial that has the best chance of showing strong 1L data is CM-9LA, which has a chemo lead-in to Opdivo + Yervoy, but that’s expected in 2H19. Importantly, Bristol likely won’t get Opdivo monotherapy to the 1L market; that’s an important segment (sicker patients who can’t tolerate combos), and Keytruda likely will be the only option,” the analyst added.
As such, Arfaei reiterates an Underperform rating on Bristol Myers shares, while cutting the price target to $47.00 (from $51.00), which represents a potential downside of 11% from where the stock is currently trading. (To watch Arfaei’s track record, click here)
Overall, out of the 8 analysts polled in the past 3 months, 4 rate Bristol Myers Squibb stock a Buy, 3 rate the stock a Hold and 1 recommends Sell. With a return potential of 25%, the stock’s consensus target price stands at $65.75.