Pipeline Prospects: Bristol-Myers' Big Plans for New Drugs

Last Updated Apr 28, 2010 2:17 PM EDT

Bristol-Myers Squibb (BMY) is rushing toward a patent "cliff" in the next few years. The regulatory approval of at least five experimental drugs will deter an earnings tumble, according to management. And BMS might just be right about that.

The company derives almost 47 percent of its revenue from two key products: Plavix (sales of $6.1 billion in 2009), a platelet aggregation inhibitor for the prevention of stroke, heart attack and vascular disease, and the anti-hypertension drug Avapro ($1.3 billion). Chief executive officer Lamberto Andreotti says the company's ambitious go-to-market model will mitigate expected erosion in sales and share-net earnings from the lost marketing exclusivity of these cardiovascular drugs come 2012.

By a 13-5 vote, an outside advisory committee recommended the FDA approve Bristol's organ-rejection drug belatacept for use in kidney-transplant patients. Belatacept, which selectively blocks autoimmune response and activation of certain white blood cells (responsible for organ rejection), provides a similar level of immunosuppressive efficacy to the older drug cyclosporine, but with improved control of blood pressure and lower rates of post-transplant onset of diabetes, according to published documents from the Cardiovascular and Renal Advisory Committee.

The one hurdle to a biological license could be an observed higher incidence of acute rejection seen in belatacept-treated patients (within two years). Nonetheless, with the transplant market desperate for novel immunosuppressive treatments, most kidney specialists and transplant surgeons expect FDA approval. A decision is expected on May 1. Leerink Swann analyst Seamus Fernandez is forecasting $650 million in sales by 2016. Expand the pool to other transplant organs and Fernandez's estimate could prove conservative.
The AVANCE-2 study showed apixaban, an oral blood thinner being co-developed with Pfizer (PFE), might be as effective, have lower bleeding risk, and offer an easier dosing schedule than subcutaneous enoxaparin, a low-molecular weight heparin marketed as Lovenox by French drug maker Sanofi-Aventis (SNY). Lovenox generated almost $4.1 billion in worldwide sales for Sanofi last year.

Bristol and Pfizer are on track to seek regulatory approval in Europe for the prevention of blood clots in patients undergoing orthopedic surgery come second-half 2010.

Apixaban is one of a new class of anti-thrombotics that directly inhibit an enzyme, called Factor-X, in the coagulation cascade. Should it reach the European market, apixaban's in-class competitor would likely be Johnson & Johnson's (JNJ) Factor-X inhibitor Xarelto (rivaroxaban), launched last year in several European countries for use in the prevention of blood clots (deep vein thrombosis or pulmonary embolisms) in patients undergoing hip- or knee-replacement surgery.

Industry analysts forecast sales for apixaban of up to $650 million by 2015; however, in my opinion this sales goal could be a stretch: (i) generic competition to enoxaparin could reach the market by 2012; (ii) the FDA declined approval of JNJ's anticoagulant last year, citing concerns of elevated bleeding and liver damage. The ADVANCE-2 trial results were encouraging, as the cohort of orthopedic patients treated with Bristol's anticoagulant demonstrated a comparable bleeding rate to Lovenox.

To date, Bristol has received $464 million in upfront licensing and milestone payments from Pfizer, and could receive up to an additional $630 million if all development and regulatory milestones are met. The big money for apixaban lies in replacing warfarin, the gold standard in chronic anticoagulant therapy:

  • prevention of stroke in patients with atrial fibrillation (a-Fib);
  • and, the secondary prevention of cardiovascular events in patients with acute coronary syndrome (ACS - think unstable angina).
Results from an ongoing stroke prevention (in a-Fib) trial and a separate ACS study are expected in 2011 and 2012. U.S. pharmacy shelves will stay bare for several more years -- as will Bristol's cash box from apixaban sales.

Ipilimumab, a monoclonal antibody that activates the patient's own immune system, has shown promising activity in late-stage melanoma and non-small cell lung cancer (NSCLC). Moving forward, Bristol will post abstracts from several late-stage clinical trials at the June meeting of the American Society of Clinical Oncology (ASCO), with a planned second-line melanoma filing in the U.S. later this year.

If approved by regulators, ipilimumab could achieve $475 million in annual sales by 2016, says Leerink Swank analyst Fernandez. Ergo, Bristol will need to expand labeling beyond skin cancer.

Also in the pipeline is the vascular growth factor receptor inhibitor (VEGFR2) brivanib, which is in a late-stage trial for the treatment of liver cancer, and the oral diabetes drug dapagliflozin, which blocks the reabsorption of glucose.

No doubt that with expanded labeling all five of these late-stage drugs have the potential to each exceed $1 billion in peak annual sales. Given attendant risks, such as regulatory delays or outright "refusal to file" letters, Bristol's approach of betting on its R&D pipeline to moderate losses from patent expirations could prove limiting to sales and earnings. Tim Anderson, an analyst at Sanford Bernstein, commented in a research note last month:

Although B-MS has been steadfast in saying it would only pursue smaller deals as part of its 'string of pearls' approach, we continue to wonder whether a larger transaction might ultimately occur.
With a $10 billion war chest, we likely won't have to wonder too long.

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  • David Phillips

    David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.