Our updated thoughts on the BMY-CELG transaction, MRK numbers ahead of the quarter, and the opportunity in adjuvant IO from our 3/15 Wolfe Healthcare Biweekly Webcast.
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BMY held a meeting with sell-side analysts on Friday morning – the meeting was called in a semi-urgent fashion, with notice only going out on Weds. While not stated directly, the intent was clear: to drum up support for the proposed CELG acquisition given some recent, high profile, dissenting shareholder opinions.
A slide deck describing our updated fundamental outlook for the sector from our February Monthly Controversies report.
Our updated thoughts on the BMY-CELG transaction from our 3/1 Wolfe Healthcare Biweekly Webcast.
News that investment management firm Wellington does not support the proposed acquisition of CELG by BMY dovetails well with results from our recent investor survey (Global Pharmaceuticals - BMY-CELG Investor Sentiment Survey Results) and our own views. Our position in recent weeks has been that while we are not in favor of the deal, we still believe the risk:reward with BMY shares is favorable at current levels.
This 80p report covers the bull/bear case, current controversies, relative growth prospects and more for our 10 US & EU global pharmaceutical companies.
Given the mixed reaction to BMY’s proposed acquisition of CELG, we conducted a survey of 112 investors to better gauge investor sentiment.
On Saturday afternoon (2/16/2019), MRK presented detailed results from its KEYNOTE-426 trial at ASCO-GU – earlier in the week partial details had been released. See Exhibit 1 for how results compare to BMY’s Opdivo/Yervoy (CM-214) and PFE/Merck KGaA’s Bacenvio/Inlyta (JAVELIN Renal 101). The bottom line is that despite strong MRK data, BMY’s already-approved Opdivo+Yervoy will still likely retain some share in its labeled indication in 1L renal cell carcinoma (RCC); PFE’s regimen may also capture some share, but to a smaller degree. MRK’s data has been an overhang on BMY shares.
On Thursday before market open (1/24/19), Bristol-Myers Squibb (BMY) reported 4Q18 results that were in-line on revenues (actual: $5.97B vs. consensus: $5.98B) but beat on EPS (actual: $0.94 vs. consensus: $0.85).
The optics of the quarter were not great in the setting of the pending CELG transaction, with Opdivo sales coming in slightly below consensus. This begs the bear case that Opdivo is finally starting to slow down (because of dynamics in the lung cancer setting) and that this is the driver of BMY buying CELG, out of desperation. In general, BMY did not provide much new information today beyond financial results – the timing of its 3 1L NSCLC trials was consistent with what we learned at a recent brokerage conference, and the company continues to not give color on Opdivo’s growth beyond 2019 which is something we think it needs to do (at least bracket scenarios, providing “book ends”).
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