Recently, Bristol-Myers Squibb Co. (BMY) received a boost with the US Food and Drug Administration (FDA) approving Baraclude (entecavir) for an additional indication. The current approval by the US regulatory authorities allows Bristol-Myers to market Baraclude for treating a more serious form of liver disease than hepatitis B virus (HBV), for which it is one of the top prescribed therapies.
The latest approval allows Baraclude to be marketed for treating adults suffering from chronic hepatitis B (CHB) with decompensated liver disease. The disease leads to improper functioning of the liver due to severe scarring of the organ. Chronic hepatitis B infection, which affects approximately 1.25 million Americans, is often linked with inflammation of the liver.
The FDA approval for the additional indication is based on encouraging safety and efficacy data from an ongoing late-stage study. Data from the study revealed that Bristol-Myers’ therapy showed greater viral suppression compared to Gilead’s (GILD) adefovir at 48 weeks following the commencement of treatment.
We remind investors that Baraclude was initially approved in 2005 for treating patients suffering from compensated liver disease. We believe that the approval of Baraclude for the additional indication will further boost the top line at Bristol-Myers.
Apart from Baraclude, the FDA is scheduled to decide on a couple of more drugs of the pharma major this year. The marketing application for leukemia drug Sprycel, which has been found to be more effective than Novartis’ (NVS) Gleevec as a first-line therapy for chronic myeloid leukemia, will be reviewed on a priority basis in the US with a target date of October 28, 2010. The drug is already approved as a second-line therapy.
Moreover, the FDA action date for ipilimumab as a second-line therapy for metastatic melanoma is December 25, 2010. Apart from these, Bristol-Myers has other candidates in development stage. We believe that having a diversified pipeline will further boost the top line at Bristol-Myers and supplement the loss of revenues arising out of the loss of exclusivity on its key drugs, including Plavix.
Our Recommendation
Currently, we have a Zacks #4 Rank, (short-term Sell rating) highlighting near-term pressure on the stock due to the genericization of key drugs. Our biggest concern regarding the company is its high exposure to generic risk on many of its leading franchises.
However, the company has already taken measures like the extension of the Abilify agreement with Otsuka, the acquisition of ZymoGenetics and Medarex to combat the threat of generics hanging over it. Moreover, the company intends to launch five compounds — apixaban, belatacept, brivanib, dapagliflozin and ipilimumab — by 2012.
However, given the present scenario, we believe the ipilimumab launch could occur before 2012. The new launches are expected to drive growth in 2013 and beyond. Consequently, the more stable long-term outlook prompts us to have a Neutral stance on the stock in the long-run.
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