Bristol-Myers Squibb's New Cancer Drug Hits the Mark: What's Next?

By George

Source: Flickr via A-4

Bristol-Myers Squibb's decision to push heavily into the immuno-oncology arena appears to be paying off. The good news for investors is that anindependent Data Monitoring Committee halted Bristol'slate-stage trial dubbed "CheckMate-017" for its PD-1 inhibitor, Opdivo, earlybecause the drug showed a clear survival benefit insquamous cell non-small cell lung cancer, or NSCLC, patients when compared to those receiving a standard chemotherapy,docetaxel.

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Opdivo is the first PD-1 inhibitor to show a survival benefit in lung cancer patients, and these positive results may be enough to garner the drug's second approval with the Food and Drug Administration later this year.

Opdivo was previously approved for use in patients exhibiting certain types of advancedmelanoma and that have shown continued disease progression following treatment with Yervoy.

Are Bristol's shares now a screaming buy?Before jumping on this news to buy shares, I think there are a few key issues you should consider.

The first pressing issue is the indication, namely a third-line treatment for squamous cell NSCLC. On the medical side, Opdivo's ability to extend survival in this patient population is a big deal because, frankly, there are limited treatment options beyond supportive care.

Breaking this down a bit further, chemotherapy tends to stop showing any perceivable benefit at this stage of the disease, leaving experimental treatments like the EGFR-inhibitor,Erlotinib, as the last remaining therapeutic option. Put simply, Opdivo would have a well-defined niche to fill if approved for this indication.

On the flip side, third-line cancer treatments don't tend to be particularly lucrative in general. So when it comes to Opdivo's commercial potential for this particular indication, the magnitude of the survival benefit is going to be what counts. Cutting to the chase, payers are going to have to be convinced to cover a drug that reportedly costs $150,000 a year. If the survival benefit is marginal, they may balk at adding it to the formulary.

Right now, we don't know what Opdivo's actual survival data looks like across the entire test population or among select cohorts. That's going to take some time to filter down to the Street, meaning there is little reason to rush into buying shares on the back of this initial news release.

The final issue is that Opdivo doesn't exactly have a great safety record, with 42% of patients experiencing a Grade 3 or 4 serious adverse event. High adverse events rates aren't uncommon among cancer treatments, but this issue will certainly need to be weighed against the drug's clinical benefits.

Foolish takeawaysThis news definitely appears to be a step in the right direction for Bristol's immune-therapy aspirations, as well as for the field of immuno-oncology in general. That said, I think Opdivo is probably going to be a longer-term value driver than most investors are presuming right now. After all, its first two approvals probably won't generate anywhere near blockbuster type sales, and the rest of Opdivo's clinical program is fairly early stage. Personally, I'm content to watch this story unfold from the sidelines for the time being.

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George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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