What happened

Biopharma heavyweight Bristol-Myers Squibb (NYSE:BMY) saw its shares sink by a staggering 15.2% in 2018, according to data from S&P Global Market Intelligence. What caused investors to hit the exits last year?

While biopharma stocks in general performed rather poorly in 2018 due to a bevy of headwinds, Bristol's stock was particularly hard hit due to its star immuno-oncology drug, Opdivo, losing significant ground to Merck's (NYSE:MRK) Keytruda over the course of the year.   

A doctor inspecting an x-ray of a patient with lung cancer.

Image source: Getty Images.

So what

The long and short of it is that Merck's Keytruda was able to solidify its already-dominant position in untreated lung cancer during 2018. The net result -- and the issue that seems to  have weighed most heavily on Bristol's shares last year -- is that Keytruda's win in front-line lung cancer should allow to it generate nearly $2 billion a year more in sales than Opdivo once these drugs reach their commercial peaks in the next five years, according to a report by EvaluatePharma. Two short years ago, though, industry insiders widely believed the opposite would be the case.      

Now what

With Merck taking the pole position in first-line lung cancer with Keytruda last year, Bristol decided to kick off 2019 with the massive acquisition of cancer specialist Celgene Corporation (NASDAQ:CELG). This megamerger -- if it proceeds as planned -- would instantly transform Bristol into a top dog in the high-value oncology space. Celgene, after all, sports a rich pipeline of anti-cancer therapies, including next-generation product candidates such as bb2121 and liso-cel. 

That said, there are concerns that regulators might nix this deal -- or perhaps force some key asset divestitures -- over drug pricing concerns. As such, Bristol's stock may continue to struggle until this proposed megamerger actually comes to fruition.

George Budwell owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.