Bristol-Myers plunges, Merck buoyed on cancer-drug news; is it still dash for cash, or race to nowhere?

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The News:

Bristol-Myers Squibb Co. (New York City) won’t seek accelerated approval of its immunotherapy drug Opdivo for lung cancer, confirming that Merck & Co. (Kenilworth NJ) will have a huge head start with its rival treatment Keytruda.

@BMSnews won’t seek accelerated approval of its immunotherapy drug #Opdivo for #lungcancer Click To Tweet

Bristol-Myers stock plunged Friday, but edged up late on a patent-and-royalty deal with Merck over Keytruda. The drugmaker,

“has decided not to pursue an accelerated regulatory pathway for the combination of Opdivo plus Yervoy in first-line lung cancer in the US based on a review of data available at this time,” Bristol-Myers said in a statement late Thursday (January 19, 2017).

That’s a huge present to Merck, which recently received FDA-granted accelerated review for Keytruda with chemotherapy as a first-line treatment for advanced lung cancer. It could get an FDA decision by early May.

Bristol-Myers will continue to study Opdivo-Yervoy for lung cancer, but approval may not come before 2018 at the earliest now. Bristol-Myers has bet heavily on Opdivo to drive future growth. Bristol’s shares closed the week down 12% at $49.23, while Merck slipped 18 cents to $62.52.

After the market closed, Bristol-Myers and Ono Pharmaceuticals Inc. (Trenton NJ), Opdivo’s discoverer, settled patent litigation involving Merck’s Keytruda. Merck will make an initial payment of $625 million to Bristol-Myers. Merck also will pay a 6.5% royalty rate on Keytruda sales from Jan. 1, 2017 to Dec. 2023, and a 2.5% rate for the subsequent three years. Bristol will get 75% of the royalties and Ono 25%.

Steve’s Take:

With merely billions of dollars at stake in added annual sales, Bristol-Myers limped into the weekend after being officially deposed as the king of immune-boosting cancer therapies. In the race for the lead in the first-line, lung-cancer combination race, the Big Pharma giant with the hallowed moniker announced it won’t seek accelerated approval for a combination of its leading cancer drug Opdivo and another immune-oncology drug Yervoy in treating newly diagnosed lung-cancer patients. The decision was based “on a review of data available at this time.” The company didn’t provide further details, citing an obligation to “protect the integrity of ongoing registration of all studies.”

Predictably, Bristol-Myers shares wound up crashing another 12% for the week–a loss of about $10 billion in market cap. In a nutshell, the market is focusing on the two drugmakers’ competing cancer therapies: Bristol’s Opdivo and Merck’s Keytruda. These treatments are part of a new class of cancer immunotherapy medicines known as “checkpoint inhibitors.” The two companies were the first to win approval of these kinds of novel drugs (which use the body’s immune system to fight tumors), followed by Roche and AstraZeneca.

Opdivo and Keytruda are both being tested in an assortment of cancers. But one critically contested space is lung cancer. Although not the most common malignancy, lung cancer is the deadliest. That’s why Merck and Bristol-Myers have been fighting fiercely to get their PD-1 checkpoint inhibitors to the front of the pack in the approval race.

An approval to treat newly diagnosed, untreated non-small cell lung cancer (NSCLC) is expected to add billions of dollars annually to either company’s total revenue. But Bristol’s announcement that it won’t seek accelerated approval for the combination of Opdivo with another of its well-established immunotherapies, Yervoy, well, that’s really disconcerting.

Bristol-Myers has been placing extra importance on its combination potential since last August, when it disclosed that Opdivo crashed without warning in a first-line monotherapy study. A galling, further setback occurred a couple of months later when archrival Keytruda secured a monotherapy thumbs-up from the FDA. Even more exasperating was the FDA’s recent acceptance of a submission for Keytruda in combination with chemotherapy for all advanced stage, first-line NSCLC patients, not only those with high expression of the immunotherapy’s target protein.

The FDA is expected to announce a decision on Merck’s combo treatment in May. Many of us wouldn’t be surprised to see another early approval due to the sheer absence of any treatment for such a formidable disease. Lacking an application for Opdivo as a first-line treatment, and with players like Roche and AstraZeneca also in the game, the question shifts from whether Bristol can pull even with Merck to whether it can hang on to second place. Prospects for grabbing a far greater portion of the NSCLC market now seem pretty remote.

The foregoing paints a grim picture that highlights the hazards of Bristol’s decision to pin far too much of its future growth on Opdivo. According to Bloomberg, Bristol has 41 trials of the Opdivo-Yervoy mixture ongoing, with 12 in the late stages. That’s an enormous commitment/risk of its capital and scientific resources. All of this emphasis on Opdivo seemed more than justified when the medicine’s sales were growing like topsy with no one closing the gap. To be sure, an estimated 24% of the company’s 2016 sales came from Opdivo and Yervoy.

More recently however, Bristol’s focus and commitment of corporate resources suggest both are disproportionate given Merck’s success with Keytruda and the entrance of Roche and AstraZeneca into the market for checkpoint inhibitors.

“We now increasingly think that Bristol will be facing a more crowded market when it formally launches,” Barclays analyst Jeff Meacham notes, terming the runner-up position “a jump ball.”

Max Nisen at Bloomberg points out the obvious fact that Bristol’s R&D spending is too narrowly focused on expanding Opdivo’s opportunity.

“The company only has two new drugs in Phase 3 trials, and neither are expected to be blockbusters or to have much impact on sales growth through 2020,” Nisen notes. “Beyond its growing blood-thinner Eliquis, which is expected to add more than $2 billion in sales through 2020, Bristol doesn’t have much going for it, other than a set of relatively early stage projects.”

Bottom line:

The numbers say it all as to why the lung-cancer market is so crucial: the disease comprises more than 13% of all new cancer diagnoses and nearly 27% of all cancer deaths in the US. Just 17.7% of diagnosed patients are still alive five years out following their diagnosis, potentially opening up billions in sales for primarily Merck, in a field devoid of real competition.

Bernstein analyst Tim Anderson was spot on, warning AstraZeneca investors not to get too keyed up about the dash for cash in the long-cancer market. Like Bristol-Myers, the British drugmaker is striving to bring its own pair of a checkpoint inhibitor and CTLA4 protein receptor to the market, says FiercePharma.

Therefore, Bristol’s setback“may raise concerns about the viability of the overall CTLA4 combination approach, given BMY’s comment in its press release that the decision not to file early ‘is based on a review of data available at this time,’” Anderson wrote. “What ‘data’ is BMY referring to exactly?”

Exactly. What do Bristol-Myers’ scientists know that the competition doesn’t?

That begs the final question in this piece, namely, what is needed to bring NSCLC patients desperately needed survival treatment? The simple answer is time and money.

I’m reminded of a friend of our family who was injured in a car accident, got a transfusion as part of his treatment and contracted hepatitis C. He passed away in 1989, when the virus was first discovered.

Twenty-five years later–just a couple of years ago–scientists at Gilead developed an exceptionally effective cure. We now have a once-daily single tablet and three months later the virus is gone. No more interferon injections, ribavirin, nothing else. Incredible. But it took 25 years.

Steve's Take: #Cancer research takes time. Scientists know this. We need to keep that in mind. Click To Tweet

The first checkpoint antibody approved by the FDA was ipilimumab, approved in 2011 for treatment of melanoma. That was a mere six years ago. The research takes time. Scientists know this. That’s what we all need to keep in mind.