We are working our way through the 8th season of our "Pipelines Unplugged" conference call series where we interview senior R&D leadership teams from the 10 US/EU global pharmaceutical companies we cover in a "fireside chat" format.
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Back in late 2011, we began to highlight to investors the opportunity with Eli Lilly because at that point, there was NOTHING in LLY share price for its phase 3 Alzheimer’s disease drug, solanezumab, despite the fact that results were about a year away. The stock had a very nice run as investors contemplated the “what if it works” scenario, appropriately recognizing along the way that the risk of failure was still high. Even though solanezumab eventually failed, the dream that the drug industry will eventually find a drug that works in this setting lives on.
Wolfe Research's Senior Pharma analyst, Tim Anderson, hosted a “Pipelines Unplugged” webcast with Eli Lilly's Dr. Skovronsky & Dr. Gimeno
PFE held a conference call on Friday to review and answer investor questions about its Phase 1b trial for PF-06939926, a gene therapy compound for one-time administration in patients with Duchenne’s Muscular Dystrophy. Overall, data were just “okay” with excitement for positive findings on functional outcomes, MRI fat fraction, and microdystrophin expression tempered by another adverse event of consequence (thrombocytopenia) presumably related to immune response to the AAV9 capsid. PFE also gave details around its Phase 3 program, which will be a 99 patient (2:1 treatment to placebo randomization) delayed treatment trial in a younger patient cohort (aged 4-7).
ASCO abstracts have been released – for BMY, most investors will be focused on phase 3 Checkmate-9LA results that compare the combination of Opdivo+Yervoy+chemo to chemotherapy alone in the all-important setting of first-line (1L) non-small cell lung cancer (NSCLC). The amount of data disclosure in the abstract is on the lighter side, but it does contain overall survival data (still missing is PFS data, but the press release notes it was statistically significant). Based on what has been disclosed, results are about in-line with what we have expected where – relative to what has been shown previously in CM-227 – adding a short course of chemotherapy appears to improve what the combination of Opdivo+Yervoy does. The trial had been top-lined previously.
ASCO abstracts have been released. For ROG, of critical importance is tiragolumab (an anti-TIGIT antibody) where results from an important ph2 trial (ClinicalTrials.gov listing here) that compared the combination of (a) tiragolumab+Tecentriq to (b) Tecentriq monotherapy, in the all-important setting of first-line (1L) lung cancer are being shown for the first time. These are only partial results, with full results scheduled for release on May 29th at ASCO. Recall that ROG has recently advanced tiragolumab into two phase 3 trials already, one in non-small cell lung cancer (NSCLC; CT.gov listing here) and one in small cell lung cancer (SCLC; CT.gov listing here). Roche has a lead of probably ~1yr on its next closest competitor, Merck’s MK-7684.
We are upgrading ROG from Market-Perform to Outperform. The reason for the upgrade is that despite the ongoing pressure from biosimilars to major brands - such as Avastin, Herceptin, Rituxan - there is too much pipeline optionality to ignore that could lead to upward model revisions (both ours and consensus) and further P/E multiple expansion.
On Wednesday morning (05/13/20), both BMY and its partner Bluebird Bio (BLUE; not covered) each held separate conference calls to discuss the “refusal to file” (RTF) letter they received from FDA for their BLA for ide-cel (cell-based therapy for multiple myeloma, which would be a first-in-class agent), delaying submission by a handful of months on what appears to be small deficits in the application. A RTF never looks good, especially when it comes from an acquisition (Celgene) the company just spent ~$74B on. Thus far, BMY has executed relatively well on the CELG pipeline – there has been a slight delay to the approval of liso-cel (announced May 6) and now today’s news – both are with complex dossiers with complex therapies. More events are on the come for BMY that will further help investors decide whether the CELG acquisition was a good one or not. We have generally NOT been fans of the CELG transaction – an unchanged view from us - but it does bring the company a lot of new product flow, and it is usually pipeline excitement that drives drug stock performance. In the context of BMY’s P/E multiple being as low as it is (~8.5x 2021 consensus; slightly more than half of the peer group average) we have felt the stock can still “work, contingent on its execution against these events. Today’s news of a slight delay shakes that confidence a bit, but the delay is small and not that material for BMY (it is more material for the BMY/CELG CVR (BMY.RT), of course). This report combines takeaways from the BMY and BLUE conference calls.
BMY reported Q1 results ahead of the market open on Thursday, beating on revenues and EPS as every other company in our coverage has this earnings season, often due in part to COVID-related stocking. BMY kept 2020 EPS guidance intact but lowered revenue guidance slightly, saying the latter really only reflected FX trends (this leaves Merck as the only company in our coverage of 14 pharma & biotech names to lower both revenue and EPS guidance for 2020). It was a quiet quarter overall with no new pipeline news or other material disclosures. Analyst questions were balanced across a variety of topics – COVID, business development, IO, and others.
BMY reported Q1 results ahead of the market open on Thursday (05/07/20), beating on revenues and EPS as every other company in our coverage has this earnings season, often due in part to COVID-related stocking. BMY kept 2020 EPS guidance intact but lowered revenue guidance slightly, saying the latter really only reflected FX trends (this leaves Merck as the only company in our coverage of 14 pharma & biotech names to lower both revenue and EPS guidance for 2020). It was a quiet quarter overall with no new pipeline news or other material disclosures. Analyst questions were balanced across a variety of topics – COVID, business development, IO, and others. On liso-cel and the recent slippage in the PDUFA (of pivotal importance to the CVR), the company declined to discuss what the nature of the additional data submission consisted of, but it gave general assurances. BMY remains a pipeline-driven, catalyst-rich story with several new data sets reading out over the next 12mo and several new therapeutics launching – at its current low P/E multiple, this is likely to keep investors engaged in our view, but admittedly performance will be driven in part by how well it executes on these fronts. In this sense, BMY has a fair amount of binary event risk, but the odds are in favor of BMY that these individual events will play out positively for the company. Bear case concerns continue to center on BMY‘s future LOE burden – which is not at all inconsequential! This will naturally place an upper limit on the P/E multiple BMY can expect to achieve, but given the catalyst flow ahead, we still argue there is room for some additional expansion.
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