The pharmaceutical industry is famous for generating enormous profits with help from patent-protected exclusivity, but those protections don't last forever. In order to produce steadily growing profits, Bristol Myers Squibb (NYSE:BMY) has been buying up drugmakers large and small.
In this Fool Live video, Healthcare and Cannabis Bureau Chief Corinne Cardina and longtime Motley Fool contributor Cory Renauer discuss Bristol Myers Squibb's recent purchase of MyoKardia (NASDAQ:MYOK) and its role in the company's overarching strategy.
Corinne Cardina: Absolutely. Speaking of other options out there, let's talk about Bristol Myers Squibb. This company, also very known for growth through acquisition, it had a very big Celgene acquisition that was completed last year, $74 billion. I think we all remember the headlines from that, but it's not done making purchases. Now Celgene is its subsidiary, combined with Celgene, it has nine products with more than one billion dollars in annual sales, it's a lot of blockbusters. The CEO Giovanni Caforio, he has announced a new merger with MyoKardia. Let's see here, $13 billion. They announced it earlier this month and this is a heart drug developer. It has a lead asset in development that would take a precision approach to treating obstructive HCM or hypertrophic cardiomyopathy. This is a chronic heart disease that has a high morbidity rate and it's looking early next year to submit for FDA approval. Cory, what do you think of this deal and the CEO of Bristol Myers Squibb calling this candidate potentially revolutionary?
Cory Renauer: It's revolutionary because it's the first drug of its type. It's going to be the only treatment for a basket of not just HCM, hypertrophic cardiomyopathy, but a basket of inherited life-threatening diseases that don't have any treatment options right now. Sorry, go ahead.
Corinne Cardina: No, that's a great point. Let's talk about the market size. How many patients out there are being diagnosed with HCM? Do you know?
Cory Renauer: It's an estimated 0.2 percent of the population if I have that number in my head correct. I don't have it at my fingers right now. I think one in 500, yeah. They're enough that it will drive a great deal of sales, but not as many as a cardiovascular drug that treats something like cholesterol, where there are like 10, 20 maybe 30 million people that might need it. We saw that with the last class of biologic injectables, the PCSK9s, those are still not performing very well in spite of a great deal of investment and they are incredibly effective. But they just don't sell very well because there's been a great deal of pushback from insurers that are worried that everybody is going to end up using them.
Corinne Cardina: Very interesting. If we were going to compare these two from a cancer standpoint, how would you say Bristol Myers cancer strategy compares to Gilead's?
Cory Renauer: In my notes, I wrote Bristol's using spreadsheets. What I mean by that is that Trodelvy is approved and it is generating cash flows, but we don't know how much and we don't know how successful it's going to be. The same with Forty Seven, it was a clinical-stage company. Twenty-one billion is a big acquisition through a company of the size of Gilead Sciences (NASDAQ:GILD), Bristol Myers is a much larger company. When it acquired Celgene, it acquired enormous cash flows from Revlimid, although it had to let go of Otezla. The money that's coming, it balances, that deal works out. You can see how that's going to make money for investors in the near future. Something great doesn't have to happen.
Corinne Cardina: Absolutely. Just so everyone's on the same page, Bristol Myers had to divest its psoriasis and psoriatic arthritis drug to Amgen (NASDAQ:AMGN) in order to satisfy the Celgene deal from an antitrust standpoint. So just dropping Amgen into the chat. Final question on Bristol Myers, Cory, what do you think of this as a stock? Is it a good buy today? Do you think it could outperform?
Cory Renauer: I think it's a soft buy. I'm not super excited about it right at the moment, but I would prefer Bristol Myers to Gilead right now from any of the [...] fairly steady cash flows through not just HIV like Gilead has, but Bristol Myers has Eliquis as well as Opdivo and Revlimid.