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In a stunning setback for Bristol-Myers Squibb, its blockbuster Opdivo medicine failed to meet the primary endpoint in an important, late-stage study involving patients with newly diagnosed non-small cell lung cancer. The news sent Bristol-Myers stock plunging 17 percent in early trading, while giving a boost to Merck, its biggest rival among companies with so-called checkpoint inhibitor treatments.

Specifically, the top-line results from the Phase 3 trial, which is called Checkmate-026, indicated that Opdivo failed to show progression-free survival in patients. By comparison, Merck disclosed two months ago that its own Keytruda treatment met the primary endpoint in a trial in which the drug was being tested for the same condition.

“This is a major surprise,” Evercore ISI analyst Mark Schoenebaum wrote in a note to clients. “Investors had high expectations for this trial.”


Indeed, Bristol-Myers has, so far, achieved remarkable success with its immunotherapy treatments in combating various forms of cancer. The trial results are likely to undermine assumptions that the drug maker will maintain its leading role in treating lung cancer, the deadliest form of cancer and which Wall Street analysts peg as the largest market for these types of medications.

Bristol-Myers and Merck “have been locked in a marketing battle in lung cancer, which is likely a $10 billion to $15 billion opportunity, with Bristol-Myers dominating thus far by a wide margin,” wrote Sanford Bernstein analyst Tim Anderson in an investor note this morning. “Today’s news very much helps level the playing field and is a major boost for Merck.”


Although Bristol-Myers has not released further information about the trial, analysts suggest the company, effectively, lost a bet in its trial design. The company enrolled patients with lung cancer who had low levels of a protein called PD-L1. In its Keytruda study, Merck took a different approach study by restricting enrollment to patients with lung tumors who had high levels of this protein.

PD-L1 has become an important clinical target for immunotherapies, and developing an effective treatment for patients with low levels of the protein could offer financial rewards. However, developing such an immunotherapy is a challenge.

“The missed result likely reflects the fact that Bristol-Myers pushed the envelope too far,” wrote Anderson. The company “was, in essence, trying to broaden the patient population where it could claim a benefit (had results been positive, of course), but failed results suggest they likely made it too broad, meaning they enrolled patients with too little PD-L1 expression, and this soured the overall analysis.”

For several years, Bristol-Myers has attempted to transform itself into a more focused big pharma with its immunotherapy programs, which involves medicines that use the body’s own immune system to fight tumors. Opdivo was one of the first such medicines to be approved and, prior to the latest news, Wall Street had forecast sales of roughly $8 billion by 2020 for treating lung cancer alone.

Now, though, Evercore ISI’s Schoenebaum forecasts the study failure will wipe out as much as $4.5 billion from revenue forecasts for the medication. Meanwhile, Merck may pick up much of those sales since the company will be alone in the market for first-line non-small cell lung cancer treatments for two to three years before any combination therapies become available.

“There appears to be no silver lining,” Leerink analyst Seamus Fernandez wrote in an investor note. “Bristol-Myers management was surprised and disappointed. In our conversation with the company they noted their analysis suggests no anomalies in the data … We’d expect Merck to gain significant traction in the overall market” for first-line lung cancer treatments.

On the other hand, Bristol-Myers may be able to salvage something, according to Anderson.

“Is all hope lost? No,” he wrote. In a best-case scenario, he posits that a subgroup analysis of patients may allow the company to get Opdivo listed in compendiums that are used to secure reimbursement from payers. However, he noted this would only apply to the United States, and such a listing does not allow a company to market a drug to physicians, which is a significant restriction.

For that to happen, the US Food and Drug Administration would have to approve a label change, he explained, and it seems “highly improbable” a subgroup analysis could convince the agency. “In other words, in things like direct-to-consumer advertising, Merck will very likely be the only one allowed to say its drug is the only one that has been proven to improve survival in first-line lung cancer,” he wrote.

Merck’s Keytruda was approved in 2014 to treat melanoma and for patients whose lung cancer has not responded to chemotherapy. Opdivo was first approved that same year and is now indicated for treating patients with melanoma, previously treated non-small cell lung cancer and renal cell carcinoma, and relapsed classical Hodgkin lymphoma.

  • BMS has a history of over hyping its drugs then failing spectacularly. Don’t you dig those Opdivo tv ads, people staring upwards, I’m always expecting announcer to say “its a bird, its a plane, its Opdivo!” which by the way will give you another eight weeks of terminal life. For the pre geezers in the crowd read the story of Vanlev, whose failure actually cased a larger one day drop in BMS stock (22%) than today’s tanking of 17% due to Opdivo. The only thing that’s surprising to me is that the investor crowd had such faith in a drug trial in the first place, and reaffirms the fact that when you get to phase 3 the only slam dunk is that your bonus will now be flying out the window. You can look and find it zooming towards that Opdivo billboard at the top of the building. Guess it wont be a chance for those good old stock options to live longer.

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