Shares of Bristol-Myers Squibb fell nearly 10 percent on Friday following Thursday's announcement that it would not seek accelerated approval of its immunotherapy drug combination in first-line lung cancer, further solidifying Merck & Co's leading position in the burgeoning immuno-oncolgy field.
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Lung cancer is by far the biggest oncology market and a handful of companies have been jockeying for position in the battle to become dominant in initial, or first-line, treatment, and to provide much-needed combination therapies.
Merck shares rose 3.8 percent to $62.60, while Bristol fell to $50.04.
Bristol-Myers had suggested it would seek a path to swift approval of an Opdivo/Yervoy combination in first-line non-small cell lung cancer (NSCLC) only to reverse course after reviewing available data. The company did not say whether the data was disappointing or merely insufficient to seek accelerated approval.
Cowen and Co analyst Steve Scala downgraded his rating on Bristol shares to "market perform" from "outperform" and lowered his price target on the stock to $65 from $85.
The news followed Merck's surprise announcement last week that it had filed for swift U.S. approval of its Opdivo rival, Keytruda, in combination with chemotherapy in first-line lung cancer, and had received a May 10 regulatory decision date.
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"Opdivo sales could be at risk given possible availability of Merck's Keytruda/chemo combo in the second quarter, and there might be more risk in earnings per share given that lung market dynamics are changing quickly," Scala wrote.
Merck will not only likely be first, but said its combination will be less expensive than rival therapies due to the lower cost of older chemotherapy versus combinations that pair immuno-oncolgy drugs.
Bristol, which had been first to market with potentially game-changing drugs that spur the immune system to fight cancer, was long perceived as the industry leader in immuno-oncology, with Merck hot on its heels and AstraZeneca and Roche playing catch-up.
That changed in August, when Opdivo failed as a monotherapy against first-line lung cancer, where Keytruda succeeded, resetting the immuno-oncology pecking order.
Some analysts said the latest Opdivo setback was good news for AstraZeneca and Roche, allowing them to close the gap on Bristol-Myers.
However, Bernstein analyst Tim Anderson noted that Astra's combination includes a CTLA4 drug similar to Bristol's Yervoy.
"This could have negative implications for AstraZeneca, who similarly has CTLA4 combination at the heart of its IO platform," he wrote.
AstraZeneca shares were off 3.3 percent.
(Reporting by Bill Berkrot; Editing by Tom Brown)