Bristol-Myers Squibb gets another blockbuster drug approval


Llast month, Bristol Myers Squibbit is (NYSE: BMY) the third best-selling drug, Opdivo, in combination with chemotherapy, has received European Commission (EC) approval to treat patients with advanced, recurrent or unresectable metastatic esophageal squamous cell carcinoma.

What led the EC to give the green light to the Opdivo-chemotherapy couple? And what increase in revenue could this bring to this large pharmaceutical stock? Let’s dive into the data of Phase 3 clinical trial results of the combo and the European Union esophageal cancer market to find an answer.

The care couple is powerful

Esophageal cancer is a form of cancer that starts in the esophagus, which is a tube that runs from the throat to the stomach. Symptoms of esophageal cancer can include unintentional weight loss, difficulty swallowing, coughing, and chest pain.

But because early-stage esophageal cancer usually has no symptoms, about 50% of patients with esophageal cancer are diagnosed with metastatic cancer. This means that the cancer has spread or metastasized from the original site to more distant organs such as the lungs or the brain. And as a result, the tumors are often unable to be surgically removed. This is called irresectable.

For these reasons, the prognosis for patients with metastatic esophageal cancer 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 combination was 53.2%, which was significantly higher than the rate of 19.7% for patients on chemotherapy alone who responded to treatment. This means that a much higher proportion of patients on Opdivo-chemotherapy treatment achieved either a reduction in the amount of cancer in their body or the signs of cancer disappeared completely.

The superior efficacy of the Opdivo-chemotherapy combination 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 only chemotherapy.

Image source: Getty Images.

A slight increase in sales

The Opdivo-chemotherapy combination has the potential to be a game-changer for patients with esophageal cancer. So how much annual sales will this mean 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 carcinomas. Finally, 50% of patients are diagnosed with advanced or metastatic cancer. This equates to an eligible patient population of approximately 13,500.

Based on the effectiveness of the Opdivo-chemotherapy combo and the relatively limited treatment options for patients, I believe Bristol-Myers Squibb can capture 25% of this market. This equates to nearly 3,400 patients.

Opdivo has an annual list price of around $170,000 in the United States. Since drugs in the European Union have list prices about half the cost in the United States, I will assume an annual list price of $80,000 per patient for Opdivo. And I’ll 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. That’s just a 0.4% increase in annual sales, given that analysts expect Bristol-Myers to make $46.5 billion in revenue for 2022.

But that would be a more significant 2.7% increase from the $7.5 billion in revenue Opdivo generated for Bristol-Myers in 2021.

Bristol-Myers Squibb has an excellent pipeline

What makes Bristol-Myers worth buying is its pipeline. In addition to Opdivo, the company has over 50 compounds in various stages of development in over 40 disease areas.

That’s why analysts estimate the company will produce 4.4% annual earnings growth over the next five years. The stock held by Buffett trades at a forward price-to-earnings ratio of just 9.4, making it a solid buy for value investors.

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Kody Kester holds positions at Bristol-Myers Squibb. The Motley Fool fills positions and recommends Bristol-Myers Squibb. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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