From Credit Suisse....
Additional Thoughts on This Morning’s
■ Bottom Line: Following our initial quick take on the multiple Bristol headlines
from this morning, we provide some additional thoughts here on each topic.
■ CheckMate-459 Misses Primary Endpoint: The hepatocellular market is a
relatively small one (~11K patients in the US and ~38,000 globally) but one
that Bristol seemed to be well positioned from a timing perspective. While the
trial showed a trend towards an overall survival benefit, the lack of statistical
significance opens the door for competitors such as Merck, Roche and Astra
to become the dominant player(s) in this indication with the various
combination trials they are currently running.
■ Otezla to be Divested: We are surprised that Bristol will be divesting Otezla
in order to address concerns raised by the FTC and allow for the Celgene
deal to close in a timely manner. Like Otezla, Bristol’s key internal pipeline
asset is their Phase 3 oral TYK-2 inhibitor BMS-986165, which is also in
development for psoriasis. However, given how competitive the psoriasis
market is and the drugs' different mechanisms of action, we did not expect
the FTC to have concerns with the overlap. Otezla is admittedly not one of
the “core” products of the Bristol/Celgene deal, but it is still a growing asset
(we assume sales of $2.5Bn in 2023 from ~$1.6Bn in 2018) and it would
have provided nice commercial synergies for Bristol as they prepare to
launch BMS-986165 in a few years. The key for Otezla now will be what
Bristol can obtain for the asset. We believe sellers are often at a
disadvantage when potential buyers know they need to divest a given asset,
but there are many companies with drugs in the dermatology space that may
look to bid on the asset. In our coverage alone we believe AbbVie, J&J, and
Lilly may be interested, assuming they do not see any regulatory concerns
with how Otezla would fit into their portfolios. Our PharmaValues database
suggests an NPV of ~$9.3Bn for the drug.
Celgene Deal Close Pushed Out: As we have previously noted, we believe there aremany investors that are intrigued by the Bristol story, especially given the stock’s current
valuation. However, we also believe some of these same investors are waiting for the
CheckMate-227 data in lung cancer to pass and waiting until the Celgene deal gets closer
to closing before getting into the name. The CM-459 results will likely raise further
questions on how the CM-227 will look, while the deal close getting pushed out until end of
2019/beginning of 2020 may keep these potential investors on the sidelines a while longer.