Summary

• Opdivo is expected to see 2020 sales declines, but key upcoming readouts could drive growth in 2021

• Within the pipeline, Ozanimod, Liso-cel, and Ide-cel all are expected to receive approval and have shown promising data

• This bodes well for the CVR, but note that the timelines are tight, especially for Liso-cel
  

Competition Impacting Opdivo, but Upcoming Readouts Will Determine 2021 Growth

Opdivo represents about 17% of combined sales and is one of the company's key oncology drugs. In BMY’s most recent 3Q, BMY reported Opdivo sales of $1.8B, which slightly missed consensus expectations by about 1.8%. Additionally, management gave guidance for Opdivo sales to decline in 2020, driven in part by Keytruda's success in first line (1L) lung business impacting Opdivo's second line (2L) lung business. However, management also sees a return to growth starting in 2021 driven by upcoming readouts over the next 12-18 months. There are several key readouts in lung and kidney, and several trials in the adjuvant setting that could play a critical role in determining the growth trajectory for the drug going forward.

In lung, Bristol-Myers is looking to gain share from leader Keytruda. As I detailed in my prior note on Merck's Keytruda, Bristol-Myers Squibb recently announced positive topline results from their phase 3 trial Checkmate-9LA (CM-9LA) studying Opdivo (nivolumab) plus low-dose Yervoy (ipilimumab) with two cycles of chemotherapy for 1L non-small-cell lung carcinoma (NSCLC) against chemo alone, with safety "reflective of known safety profiles of the immunotherapy and chemotherapy components in first-line NSCLC."

The results were received with lukewarm positivity for several reasons. First, Keytruda's KN-189 set a very high bar for CM-9LA that investors are skeptical Opdivo can meet, with a 22.0 month median overall survival (mOS) and a hazard ratio (HR) of 0.56. Second, Keytruda's safety profile and physician familiarity and comfort with the drug presents an additional high bar. CM-9LA will need to show a sizable benefit in order to overcome the bar.

Investors await full details from the trial, expected to be provided some time in 2020 (potentially at the American Association for Cancer Research (AACR) in late April), and expectations appear muted. The key question among investors is whether a CTLA-4 (i.e. Yervoy or tremelimumab) with a PD-L1 + chemo combo will improve the survival benefit significantly, allowing Opdivo to carve out a niche in 1L NSCLC. Full results are crucial here to have better visibility into Opdivo’s commercial viability against Keytruda, and Opdivo’s growth rates in 2021 and beyond.

In kidney, BMY is looking to gain share within 1L renal cell carcinoma (RCC), where again, Keytruda remains best-in-class. Recall that Keytruda + Inlyta showed a overall survival (OS) hazard ratio (HR) of 0.53 (Keynote-426) compared to 0.68 for Opdivo + Yervoy (Checkmate-214) and higher HRs for other competitors. Investors await Checkmate-9ER (CM-9ER), which is studying Opdivo + EXEL's tyrosine kinase inhibitor (TKI) Cabometyx vs. PFE's Sutent in RCC. There is a chance that results will be better given that Cabometyx is viewed as being a superior TKI to Inlyta. In terms of safety, while difficult to compare cross-trial, Opdivo+Yervoy does appear to be safer in terms of grade 3-4 treatment-related adverse events (TRAEs).

CM-9ER should report top-line results sometime in 1H20. Without a strong PFS and OS benefit vs. KeyNote-426 (KN-426) results, expect Opdivo/Yervoy to compete solely in the high risk patient pop (~75% of patients). Note that Keytruda has had some success here as well in combination with Eisai's TKI Lenvima, but has also shown some safety issues. Interim OS evaluation could occur by mid 2020. The bar is KN-426's 0.53 HR.

Beyond these two areas, Opdivo has a number of adjuvant trials that are expected to readout in in 2020 or 2021 (note that management stated 2021 on the conference call, but clinical trials lists some trials completing in 2020), including in melanoma (CM-915), bladder (CM-274). There's also CM-816 in the neoadjuvant setting that should read out in 1H20 as well. Management expects that these readouts should contribute to growth beyond 2021, and consensus expectations among investors agree. However, we will need to see supportive readouts over the next 6 months to have more visibility on the growth trajectory. 

Pipeline Looks Attractive, but Approval and Timing Necessary for CVR Payout

There are several key drugs in BMY's pipeline, with most of them coming from the Celgene acquisition. I'll provide short updates on the key pipeline drugs tied to the CVR here (Ozanimod, Liso-cel, and Ide-cel), but would note that Reblozyl, Inrebic, and TYK12 are also on investors’ radars.

Ozanimod. Ozanimod is a sphingosine 1-phosphate (S1P) for relapsing forms of multiple sclerosis. Recall that Celgene filed an application in February 2018, and received a refusal-to-file letter from the FDA. After completing bridging studies and resubmitting the application, the FDA accepted it and a PDUFA is now set for 3/25/20. Note that Ozanimod's data itself was fine, with good efficacy and safety. FDA acceptance is further derisked as other S1P drugs, Gilenya and Mayzent, have been approved. Management has guided to $4-6 billion in peak sales, and consensus is currently modeling $1.7B by 2025. Ozanimod looks to have similar efficacy to Gilenya and better safety (with lower incidence of class side effects such as cardiac and liver adverse events vs. Gilenya). However, competition within this indication has also heightened with Novartis's Mayzent, Merck's Mavenclad, and a potential generic entry in 2023.

Liso-cel (JCAR017). Liso-cel is a anti-CD19 CAR-T therapy for non-Hodgkin lymphoma cells. BMY aims to submit an application to the FDA in r/r DLBCL in 3L+ therapy and expects approval by mid-2020. Updated results from TRANSCEND NHL-001 pivotal ph. 1 study in r/r large b-cell lymphoma is expected to be provided at ASH.  Abstract data already revealed showed a strong 53% complete response (CR), slightly better than Yescarta's 51% and Kymriah's 32%. Additionally, safety data showed lower rates of cytokine release syndrome  (CRS) and neurotoxicity compared to both Yescarta and Kymriah. Celgene had noted that this drug could reach $3B in peak sales, and consensus currently models $1.1B by 2025; it should be noted that other CAR-T therapies have been slow to gain traction in the market due to reimbursement issues and other adoption issues.

Ide-cel (bb2121). Ide-cel is a BCMA CAR-T therapy aimed at relapsed/refractory multiple myeloma. I detailed the BCMA space in my prior article on GSK, noting that ide-cel and GSK's belantamab mafodotin were the two most developed drugs currently in the space, which is now a hot spot for development. While belantamab looks like it will be the first to market, ide-cel looks to have the highest efficacy in heavily-pretreated patients with a 96% ORR and an impressive 50% CR. Investors expect topline results in the ph. 2 KarMMa trial by year end, submission by 1H20, and approval by 2H20. Celgene had guided to >$2B in peak sales, and consensus models $1.2B by 2025. The BCMA space looks like it will develop into a hotly-contested space, and ide-cel does look to have high rates of CRS, neutropenia, and neurotoxicity, consistent with other CAR-T therapies. For additional details, see my recent GSK article on the BCMA space.

CVR. For a quick background, each Celgene share converted into 1 BMY share, $50 in cash, and 1 Contingent Value Right (CVR) that trades under the security BMYRT on the NYSE. The CVR will pay out $9 if the company is able to receive approval of ozanimod by 12/31/20, liso-cel by 12/31/20, and ide-cel by 3/31/21. Note that BMY must receive approval for all three by the timelines in order to receive the $9 payment. As I've highlighted above, all three drugs are generally thought to be likely to receive approval by the street for the reasons I've highlighted above. As a result, a key factor is receiving approval by the timelines noted, as the deadlines look to be tight. The tightest deadline may be liso-cel, which needs to either be submitted 1) before year end (which management is targeting), or 2) receive priority review, to comfortably meet the 12/31/20 deadline. If the drug is submitted after Jan 1, 2020, and receives standard review (on the rationale that there are now two other CAR-T therapies on the market), the drug may not meet the deadline, even with approval. Submission dates for ide-cel should also be monitored, although it appears less likely to miss the 3/31/21 deadline. Taking approval likelihood as well as timelines into account, it would seem that the street currently expects a less-than 50% chance of hitting all milestones for the $9 payout, even though each individual event (i.e. receiving approval and meeting the deadline for liso-cel) all appear likely.

Bevy of Catalysts Coming in Six Months

With numerous trials for Opdivo expected to read out in the coming months, along with key pipeline updates, Bristol-Myers Squibb should see stock volatility as the future growth trajectory becomes more visible over the next few months. Additionally, the recent acquisition of Celgene adds additional margin leverage to the story, as the company has announced and already begun integration plans (with $2.5 billion in announced cost synergies). As a result, if the readouts are successful, BMY’s future could look significantly better six months from now if the readouts play out as management hopes.