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Msg  596 of 750  at  6/24/2019 4:55:51 PM  by

lumpygravy


Modest Setbacks

From J.P. Morgan....
 
Otezla Divestiture Announcement and 1L HCC Miss
Represent Modest Setbacks
 
This morning, Bristol announced plans to divest Otezla to remove FTC concerns on
the pending BMY/CELG transaction. In addition, Bristol announced that the CM-459
study of Opdivo monotherapy in 1L HCC failed to meet its primary endpoint for
overall survival. Overall, we see the Otezla announcement as a surprise and
representing a modest setback for Bristol with the timeline to close the BMY/CELG
transaction pushed back to late 2019 / early 2020 and removing an asset from the
company’s immunology portfolio. That said, we see Otezla as a potentially attractive
product for a range of companies (which should support a healthy price for the asset),
and Bristol has BMS-986165 (TYK2 inhibitor) under development (mid-2020 Phase 3
readout), which we see as a potential best-in-class oral psoriasis treatment. On CM-
459, we did not forecast 1L HCC sales for Opdivo, but the indication would have
represented a nice upside driver to estimates had it hit. Remain OW.

Bristol now looking to divest Otezla as part of BMY-CELG transaction, but we
continue to see BMS-986165 (TYK2 inhibitor) as a potential best-in-class oral
psoriasis treatment.
As a reminder, we currently forecast $1.9bn of 2019 sales for
Otezla (PsO, PsA indications) and $2.5bn sales at peak in 2024. Overall, the
announcement represents a modest setback for Bristol, removing an asset from the
company’s immunology portfolio. At the same time, we would expect Otezla to sell
for an attractive multiple with the product still growing and with a wide range of
companies in the immunology space. Further, Bristol has BMS-986165 (TYK2
inhibitor) for psoriasis currently in late-stage development (mid-2020 Phase 3
readout). We view BMY’s TYK2 as one of the company’s most promising pipeline
assets and a potential best-in-class oral psoriasis treatment.

Separately, on transaction timing, Bristol now expects the BMY/CELG deal to close
in late 2019 / early 2020.
While today’s news does not meaningfully change the
strategic rationale of the transaction, we see deal close as a catalyst for BMY shares
and today’s announcement delays that by ~3-6 months vs prior expectations.

Opdivo did not its meet primary endpoint for OS in CM-459 study of 1L HCC
patients.
Bristol announced that the CM-459 study of Opdivo monotherapy in 1L
HCC failed to meet its primary overall survival endpoint. Topline study results
showed a positive trend on OS, but the 15% risk reduction (HR=0.85) on overall
survival did not achieve statistical significance. Overall, we view today’s results as a
modest setback, although not altogether surprising given the challenges of the 1L
HCC setting. As a reminder, Bristol is approved in 2L+ HCC, and we do not
currently forecast 1L HCC sales. No new safety signals were observed as part of the
study.

 
 


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