Bristol-Myers Squibb Co. Doubles Down On Immuno-oncology

Bristol-Myers Squibb has made severe cuts in order to streamline its immuno-oncology efforts. Will opportunities in this field allow the company to grow once again?

Jan 17, 2014 at 6:30PM

Bristol-Myers Squibb (NYSE:BMY) has shown that it is serious about becoming a specialty biopharmaceutical company with an immuno-oncology focus. Although it has some promising compounds both on the market and in the pipeline, competition from Roche (NASDAQOTH:RHHBY) and Merck (NYSE:MRK) are likely to complicate matters.

The commitment
In November 2013, Bristol-Myers cut R&D staff, severing nearly all discovery work in diabetes, hepatitis C, and neuroscience. The cuts to the crowded and/or risky indications will largely benefit the company's immuno-oncology operations.

Late last year, Bristol-Myers furthered its commitment. Shortly before diabetes treatment Farxiga won approval by the FDA, Bristol-Myers essentially cut its ties to the therapy. On December 19, 2013, AstraZeneca (NYSE:AZN) announced that it would acquire Bristol-Myers' stake in their diabetes partnership . Clearly, Bristol-Myers isn't just paying lip-service to restructuring its operations around this promising field of cancer therapy.

Oncology bets aside, the early sale could prove positive for Bristol-Myers. It received $2.7 billion upfront and another $1.4 billion in milestones along with additional sales royalties. Farxiga will face some tough competition with Johnson & Johnson's Invokana. In the near term, it may also compete with Eli Lilly's empagliflozin, another SGLT2 drug currently under FDA review.

Reasons for the excitement
There is plenty of evidence that the immune system recognizes cancerous cells and is capable of eliminating them. In many types of cancer, malignant progression is coupled with severe immunosuppression. In other words, the growth and spreading of tumors usually occurs while the immune system is looking the other way. Investigators once believed tumor cells hid themselves. More recently, researchers understand that tumors effectively blind immune cells to their presence.

Traditional cancer therapies assault normal healthy cells as well cancerous ones. Antibody-drug conjugates, or ADCs, are a more effective way of precision-bombing cancer cells with chemotherapy payloads. Even ADCs inflict some collateral damage to normal tissues.

What makes drugs like Bristol-Myers's Yervoy and nivolumab so exciting, is that they lack toxic payloads. Although they represent no direct threat to cancer cells, they effectively suppress tumors by removing blindfolds, and allowing the immune system to do its job.

Yervoy has had much better luck gaining traction in the market than its immunotherapy fore-bearers. Launched in March 2011, Yervoy took off like a rocket and hasn't looked back yet. The company recorded an even $700 million in Yervoy sales during the first nine months of 2013. That's an increase of 41% from the same period a year earlier.

Government payers have exhibited a bit of sticker shock over the drug, but they're slowly coming around. A four-dose treatment totals about $120,000, but it may also be the only treatment to effectively extend survival in patients with advanced melanoma.

Payers should grudgingly continue to pay for the treatments following the results of a long term survival study released in September of last year. In a study that included 4,846 patients, it shows three year overall survival of about 21%. More interesting is a sort of plateau that suggests patients surviving past three years often go on for five, even 10 years. The data reaching that far back includes patients from earlier Phase 3 and even Phase 2 trials, but it does point in the right direction.

It appears that Bristol-Myers is about to repeat Yervoy's success. Some tumors secrete PD-L1 and PD-L2, which trigger the destruction of nearby activated T-cells. Nivolumab prevents these molecules from reaching their target. This allows the immune response to tumor cells to continue.

Combined with Yervoy, and on its own, nivolumab has shown some promising results. In October 2013, the company released data from a Phase 1 trial involving patients with multiple forms of cancer. One highlight included heavily pretreated lung cancer patients. Survival rates with nivolumab were 42% at one year, and 24% at two years. The therapy is in the middle of several Phase 3 studies and a biologics license application (BLA) for at least one indication is likely this year.

An anti-PDL1 competitor
Bristol-Myers isn't the only drug major with an eye on this pathway. Roche is in early development stages with an anti-PDL1 therapy. In September 2013, Roche released data from a Phase 1 trial that showed it similarly effective as nivolumab in advanced lung cancer patients. It is difficult to do an apples-to-apples assessment with the limited data, but there is a solid chance that nivolumab will eventually compete with this therapy.

Merck breaking through
It seems that Merck has a serious anti-PD1 contender. Recently, the company started a rolling BLA submission for MK-3475. This gives regulators a chance to review portions of the application as the company can make them available. It seems the FDA is serious about getting this one to the public as fast as possible, in April 2013 it was given the new Breakthrough Therapy designation for advanced melanoma.

Final take
Streamlining has its benefits, but it also leaves the company far less diversified. With one year forward price-to-earnings ratio above 30 after shares appreciated 62% in 2013, a great deal of optimism about the immuno-oncology programs are already priced into shares of Bristol-Myers. Any misstep, or increased threats from the competitors are likely to be amplified in its price. This is a great company with an exciting future, but things might get choppier than investors expect.

Bristol-Meyers isn't the only way to capitalize on cancer breakthroughs
The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In the Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information