Last month, Bristol-Myers Squibb's (BMY 0.11%) third-best-selling drug, Opdivo, in conjunction with chemotherapy, was given the nod by the European Commission (EC) to treat patients with unresectable advanced, recurrent, or metastatic esophageal squamous cell carcinoma.
What led the EC to give the green light to the Opdivo-chemotherapy pairing? And how much of a revenue lift could this provide to this major pharma stock? Let's dive into the data from the combo's phase 3 clinical trial results and the European Union esophageal cancer market to find an answer.
The treatment pairing is powerful
Esophageal cancer is a form of cancer that originates in the esophagus, which is a tube that stretches from the throat to the stomach. Symptoms of esophageal cancer can include unintentional weight loss, difficulty swallowing, coughing, and chest pain.
But since early-stage esophageal cancer usually has no symptoms, approximately 50% of esophageal cancer patients are diagnosed with metastatic cancer. This means that the cancer has spread or metastasized from the site of origin to more distant organs like the lungs or brain. And as a result, the tumors are often unable to be surgically removed. This is referred to as unresectable.
For these reasons, the prognosis of metastatic esophageal cancer patients is poor -- with a five-year survival rate of less than 5%. Fortunately, cutting-edge treatments like the recently approved Opdivo-chemotherapy combo could improve survival rates.
The objective response rate for patients taking the Opdivo-chemotherapy pairing was 53.2%, which was significantly higher than the 19.7% rate of chemotherapy-only patients that responded to treatment. This means that a much higher proportion of patients on the Opdivo-chemotherapy treatment achieved either a reduction in the amount of cancer in their body-- or the signs of cancer completely disappeared.
The superior efficacy of the Opdivo-chemotherapy combo also led to a median overall survival time of 15.4 months. This was far longer than the median overall survival period of 9.1 months for patients receiving solely chemotherapy.
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A slight sales boost
The Opdivo-chemotherapy pairing has the potential to be a game changer for esophageal cancer patients. So what amount of annual sales will that translate into for Bristol-Myers Squibb?
Each year, approximately 45,000 patients in the European Union are diagnosed with esophageal cancer. Breaking it down further, 60% of esophageal cancer cases in the European Union are squamous cell carcinoma. Finally, 50% of patients are diagnosed with advanced or metastatic cancer. This works out to an eligible patient population of around 13,500.
Based on the efficacy of the Opdivo-chemotherapy combo and the relatively limited treatment options for patients, I believe that Bristol-Myers Squibb can seize 25% of this market. This is equivalent to nearly 3,400 patients.
Opdivo has an annual list price of about $170,000 in the U.S. Given that drugs in the European Union have list prices around half the cost of the U.S., I will assume an annual list price of $80,000 per patient for Opdivo. And I will use a net annual price of $60,000 per patient -- most of which is often paid by health insurers or through patient financial assistance programs.
This equates to an annual sales potential of $200 million. This is just a 0.4% increase in annual sales, considering that analysts are expecting Bristol-Myers to haul in $46.5 billion in revenue for 2022.
But this would be a more meaningful 2.7% increase over the $7.5 billion in revenue that Opdivo generated for Bristol-Myers in 2021.
Bristol-Myers Squibb has an excellent pipeline
What makes Bristol-Myers worth buying is its pipeline. Besides Opdivo, the company has more than 50 compounds in different stages of development in over 40 disease areas.
This is why analysts believe the company will produce 4.4% annual earnings growth over the next five years. The Buffett-owned stock trades at a forward price-to-earnings ratio of just 9.4, which makes it a solid buy for value investors.
