Bristol-Myers Squibb recently announced key developments regarding its immuno-oncology drug nivolumab. The FDA in the U.S. has granted breakthrough status to the drug for advanced melanoma and has agreed to review the license application on priority basis. The review is likely to be completed by the end of March 2015. Additionally, the EMA (European Medicines Agency) is going to accelerate the review and assessment of nivolumab for treatment of advanced melanoma as well. These developments are encouraging for Bristol-Myers Squibb, which earlier had fast tracked clinical trials of nivolumab due to successful results. Merck has already launched a similar drug this year and has first-mover advantage in the market. However, we believe that the market is big enough to accommodate more players, considering that the price for the drug is going to be high.
Our price estimate for Bristol-Myers Squibb stands at $36, implying a discount of about 30% to the market.
Bristol-Myers Squibb Is Pegging Its Hopes On Nivolumab
According to some estimates, the market for immuno-oncology drugs could be as big as $35 billion. There is a huge opportunity to profit from successful drugs given that small-molecule R&D productivity has declined during the last decade. WIth their focus on biologics and relatively strong immuno-oncology pipelines, Merck, Bristol-Myers Squibb and Roche each stand to gain. We expect a strong focus from each of these companies on both in-house research and development, as well as licensing relationships, to allow each to stay ahead of the curve and try to tap the market with targeted therapies as early as possible.
Bristol’s stock soared in 2013 primarily due to bullishness surrounding the company’s immuno-oncology drug pipeline. Within this pipeline, a phase III experimental drug called Nivolumab has shown the most promise, due to its superior performance in clinical trials; it has even been called the “beginning of the end of cancer” by some analysts. In Mid 2014, the company released its first set data from phase III trials of the drug which showed significant improvement in terms of survival compared to existing treatments. And now it is nearing approval, which suggests that there could be notable impact in revenues in the second half of 2015.
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