3 Companies Putting the Squeeze on Bristol-Myers Squibb

By Keith Speights Markets Fool.com

Most executives prefer to talk about their own companies instead of discussing rivals. However, Bristol-Myers Squibb (NYSE: BMY) CEO Giovanni Caforio and other officers spent a lot of time in the company's fourth-quarter earnings call on Thursday talking about products made by other companies, specifically Merck (NYSE: MRK), Roche (NASDAQOTH: RHHBY), and Gilead Sciences (NASDAQ: GILD). Here's what was said about how these three competitors are putting the squeeze on Bristol-Myers Squibb. (Quotes courtesy of S&P Global Market Intelligence.)

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Image source: Getty Images.

Merck, Merck, and more Merck

Caforio first mentioned Merck in reference to the recent settlement made over Bristol-Myers Squibb's lawsuit alleging patent infringement. Merck agreed to pay $625 million upfront to BMS and its partner, Ono Pharmaceutical, plus royalties on sales of Keytruda.However, there was a lot more discussion about how Merck and Keytruda threaten Opdivo.

Murdo Gordon, Bristol-Myers Squibb's chief commercial officer, was asked point-blank how the company would defend Opdivo against Keytruda if the drug gains approval as a first-line treatment for lung cancer. Gordon acknowledged that BMS was assuming Merck will win a thumbs-up from the FDA and said, "that clearly puts our lung business under some pressure going forward."

However, Caforio emphasized his company's broad program of exploring combination regimens with Opdivo, including with Yervoy and with chemotherapies. He added that these opportunitiescould allow BMS "to play a meaningful role in first-line lung cancer going forward."

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Caforio later had to answer a question that included a premise that BMS once held a significant lead in immuno-oncology, but had given up that lead to Merck. His response didn't dispute the premise of the question. Caforio instead pointed to the significant number of late-stage programs in the pipeline that read over the next 12 to 24 months.

And that wasn't the end of it. Another question related to the potential threat from Merck's combination of Keytruda with Incyte's ID01 inhibitor epacadostat. Chief scientific officer Francis Cuss pointed to Bristol-Myers Squibb's own combo studies with Incyte as well as the company's studies with an IDO inhibitor it gained with the 2015 acquisition of Flexus.

Roche gaining ground

While Merck and Keytruda dominated the discussion about Opdivo's prospects, another competitor's product also came up. Bristol-Myers Squibb CFO Charles Bancroft said in his initial remarks that "the U.S. lung market has started to become more competitive" primarily because of the entrance of Roche's Tecentriq as a second-line treatment.

Murdo Gordon later acknowledged that most of Opdivo's erosion of market share as a second-line lung cancer treatment has been to Tecentriq. Gordon said Bristol-Myers Squibb ended 2016 with around a 40% share of the second-line market, which was in line with the company's expectations. He added later that Tecentriq took 10% of market share away from Opdivo in the fourth quarter.

Gordon admitted that Roche was putting pressure on Opdivo in the second-line market. However, he said Bristol-Myers Squibb should be able to defend the business "with strong execution and a strong profile in second line."

Waving the white flag to Gilead Sciences in hepatitis C

Bristol-Myers Squibb's fourth-quarter numbers looked good overall. However, a glaring weak spot was with its hepatitis C virus (HCV) franchise. Sales fell off a cliff in the fourth quarter, coming in 51% below the prior-year period.

CFO Charles Bancroft didn't shy away from explaining why the HCV results were so bad. He said that competition from Gilead Sciences' new HCV drug Epclusa was the culprit. Bancroft said Bristol-Myers Squibb had halted all promotional activities for its HCV franchise in the U.S. and expected sales to drop off even faster in 2017.

While international sales for the company's HCV franchise didn't slip as badly as U.S. sales, Bancroft stated that the situation outside the U.S. would probably get worse. Gilead is steadily winning access for Epclusa in increasingly more countries.

From defense to offense

If it sounds like Bristol-Myers Squibb's executive team was on the defensive during much of the fourth-quarter conference call, it's because they were. Roche and Gilead Sciences are already hurting the company's sales. Merck probably won't be far behind.

However, BMS still has a lot going for it. Giovanni Caforio played up the company's strategy several times. The first priority of that strategy is commercial execution, particularly in international markets and with Eliquis and Orencia. The second priority is completing late-stage studies of Opdivo combos as a first-line treatment for lung cancer. The third priority is advancing the rest of the company's immuno-oncology programs. And the last priority is accelerating progress with the rest of the pipeline.

If Bristol-Myers Squibb can deliver on these goals, the stock should be a winner for investors over the long run. And maybe in a future earnings call, the company's management will be able to talk less about competitors and more about Bristol-Myers Squibb.

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Keith Speights owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.