(Bloomberg Gadfly) -- "Better than expected" doesn't necessarily mean "good" or "sustainable."
Bristol-Myers Squibb Co. on Thursday reported first-quarter earnings and revenue that beat analyst expectations, helped by better-than-expected sales of the immune-boosting cancer drug Opdivo. It's a hopeful sign that adoption of this new class of drugs continues apace, and Bristol shares rose 2 percent Thursday morning.
But the results don't change Bristol's worrying strategic situation. And they likely won't assuage Carl Icahn and hedge fund Jana Partners, traditionally active investors who have recently built stakes in the company.
The key to Bristol's success is maintaining Opdivo's lead in the increasingly crowded market for so-called immune-oncology (IO) drugs. Opdivo kept that lead in the first quarter with sales that topped analyst forecasts by more than $100 million. But there's little reason to think this says much about the future.
Bristol is still reaping some of the benefits of Opdivo's head start in treating lung cancer, the largest market available to this class of medicines. It was the first such drug approved by the FDA to treat the condition, ahead of Merck & Co. Inc's competing Keytruda.
But Keytruda was approved in newly diagnosed lung cancer patients in late October -- an approval Bristol is still chasing after Opdivo failed an overly ambitious trial at about the same time (Opdivo is currently approved only for treating patients who have tried other treatments). Roche Holding AG's drug Tecentriq, meanwhile, was approved -- in that same busy October -- to treat the same lung-cancer patients Bristol's drug treats.
The competitive pressure on Bristol will only increase the longer these rivals stay on the market. And a combination of Keytruda with chemotherapy could be approved to treat lung cancer by May 10.
While Opdivo's latest quarter looks good on a year-over-year basis, it's important to note that sales fell 14 percent sequentially, the drug's first such drop and an unusual one for a recently launched cancer medicine.
The laundry list of concerns that have cut $30 billion from Bristol's market value since the summer of 2016 and attracted potentially activist investors is still long. The company is overly dependent on Opdivo for sales growth and as a component of its R&D efforts. It has just one other substantial growth driver, the blood thinner Eliquis, and little in the pipeline that's not tied to Opdivo.
Bristol's prospects to keep a lead in the IO market rely largely on a combination of Opdivo with another IO drug Yervoy, which is already approved to treat melanoma. But the company elected not to seek accelerated approval for the duo in lung cancer. It may not measure up to Merck's chemo combo in terms of safety or its ability to get to market rapidly. And it could face competition from a similar combo by AstraZeneca PLC that is also in late-stage trials.
If it wants to keep its leadership in the IO market, Bristol needs rivals to stumble while it flawlessly executes on trials of new Opdivo uses and combos. But that has not been a recent strength of the company. The last time the market bought into such a narrative, it was badly disappointed. The company's new big investors are unlikely to be satisfied with it.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
To contact the author of this story: Max Nisen in New York at mnisen@bloomberg.net.
To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
