Bristol-Myers (BMY) Opdivo Trial Miss a 'Seismic Event', BMO Capital Says (MRK)
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BMO Capital analyst Alex Arfaei weighed in on Bristol-Myers Squibb Co. (NYSE: BMY) after the company announced that announced that in CheckMate-026 (CM-026), a Phase 3 Study of Opdivo (nivolumab) in Treatment-Naïve Patients with Advanced Non-Small Cell Lung Cancer (NSCLC) Opdivo did not meet the trial's primary endpoint of progression-free survival (PFS) in patients expressing PD-L1 >= 5%. Arfaei calls this a significantly negative for BMY and positive for Merck (NYSE: MRK).
Arfaei commented, "Clearly, based on the Opdivo data so far, we believe the market expected a positive outcome, as did we. We suspect that the reason the trial failed is that the PD-L1 threshold of at least 5% was too low (PFS and OS with these anti-PD1 therapies seem to strongly correlated with PD-L1 expression in lung cancer). We are completely puzzled by Bristol’s decision to evaluate PFS, which itself is a risky endpoint with IOs, at a threshold this low, particularly given that the trial description indicated patients would be “strongly” expressing PD-L1. Given that BMY had not disclosed the PD-L1 threshold, we and probably most of the market, thought the threshold was at least 10%, and therefore expected that the trial had a reasonably high probably of success. We also suspect that the trial did not include enough high (>50%) PD-L1+ve patients, to lift up the overall PFS and OS curves, like MRK’s KN-024 study. Again we find this puzzling given that BMY management said they would have enough patients for an ad-hoc analysis in this group to compare vs. Merck’s KN-024. However, we have been cautious on BMY for some time arguing that the stock’s valuation did not leave much room for surprises, and that the company’s over dependence on IO was risky..."
The firm maintained a Market Perform rating and price target of $72.00
Shares of Bristol-Myers Squibb Co. closed at $75.32 yesterday.
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