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Barry Cohen
Barry Cohen
Articles (246) 

New Uses Could Boost Sales of Bristol-Myers and Merck Drugs

Approvals could increase revenues of Optivo and Keytruda by a combined $12 billion

December 04, 2020 | About:

In August, analysts and investors were wondering what Bristol-Myers Squibb Co. (NYSE:BMY) could do to reverse the sales decline for one of its blockbuster drugs. This is certainly a legitimate concern considering revenue from the company's cancer treatment, Optivo, declined 9% year over year in the second quarter and another 2% in the three months ending Sept. 30 to approximately $1.8 billion.

The answer may lie in the use of Optivo—and Merck & Co. Inc.'s (NYSE:MRK) Keytruda-- in pan-adjuvant situations. In these cases, the two drugs known as PD-1 blockers would be used with patients before or after surgery along with other treatments to boost their chances of beating cancer, FiercePharma reported analysts at Bernstein said in a note to investors last week.

For Bristol and Merck, pan-adjuvant approvals could boost sales of the drugs by at least $12 billion in the next eight years—with Keytruda capturing the biggest share, according to Bernstein.

Unlike Optivo, Keytruda sales rose substantially in the third quarter, up 21% from a year earlier to $3.7 billion. Bristol management said during its third-quarter earnings call that it expects Optivo to return to growth next year.

Immuno-oncology drugs that block the checkpoint PD-1 have been one of the biggest success stories in the pharma industry. According to Market Data Forecast, the size of the checkpoint inhibitors market was valued at $12.9 billion in 2020. It is expected to be worth $45 billion by 2025, growing at a compound annual rate of nearly 29%. According to the report, the PD-1 segment was estimated to account for the largest share in 2016.

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Checkpoint inhibitors work by blocking checkpoint proteins from binding with their partner proteins. According to the National Cancer Institute, this prevents the "off" signal from being sent, allowing the T cells to kill cancer cells.

Bristol and Merck have already cashed in on regulatory approvals of their PD-1 blockers in the post-surgery melanoma market, which brings in $1.4 billion for the companies, split between the two, the Bernstein analysts said.

But the real opportunity is in pan-adjuvant settings, which Bernstein called "untapped territories." Here, the two companies each have 14 pivotal clinical trials underway.

If Keytruda proves effective in treating non-small cell lung cancer, the indication could add $2 billion in sales. Bristol, meanwhile, could add $1.7 billion in sales from the melanoma market and more than $500 million from the use of Optivo in NSCLC.

Bernstein thinks PD-1 blockers have a 75% chance of succeeding in pan-adjuvant clinical trials for NSCLC, bladder cancer, cutaneous squamous-cell, esophageal cancer and triple-negative breast cancer.

Other companies testing their PD-1 blockers in adjuvant kidney cancer are AstraZeneca (NASDAQ:AZN) and Roche (RHHBY). While Bernstein predicts Merck will corral 40% of the market in NSCLC, they think the Roche drug Tecentriq would be a worthy challenger.

Disclosure: The author has a position in Bristol-Myers.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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