Biotech Values

[DewDiligence]

BMY—Musings on 4Q16 results /2017 guidance:

http://s2.q4cdn.com/139948097/files/doc_financials/q4-2016/Q42016-Earnings-Release.pdf

BMY lowered 2017 non-GAAP EPS guidance by $0.15 to $2.70-2.90 (from the prior range of $2.85-3.05). About half of the $0.15 reduction comes from foreign exchange (i.e. the strengthening of the US Dollar relative to the Euro and Yen since the US presidential election). The other half of the $0.15 reduction in guidance comes from lower expectations for Opdivo sales in NSCLC due to: i) BMY’s assumption that FDA will approve the Keytruda/chemo regimen in first-line NSCLC (irrespective of PD-L1 status) on or before the 5/10/17 PDUFA date, based on the KEYNOTE-021 study (#msg-127767476); and ii) FDA approval of Roche’s Tecentriq in second/third-line NSCLC irrespective of PD-L1 status (#msg-125882636), which killed Opdivo’s marketing differentiation in this setting.

(FDA approval of Keytruda monotherapy in first-line NSCLC for the high-PD-L1 subgroup did not contribute to BMY’s lowered 2017 guidance because this approval was already factored into the prior guidance.)

BMY says Opdivo still has bright prospects in NSCLC due to multiple shots on goal: Opdivo/Yervoy (still), Opdivo/chemo (including the use of chemo for induction in fast-progressing patients), and Opdivo combinations with other I-O agents such as IDO-4.

Nobody on Wall Street seems to believe them, however. While analysts on today’s CC mercilessly blasted BMY for its missteps in NSCLC, no one commented on the remarkable growth of Eliquis, which sold at a $3.8B annualized rate, +57% YoY, in 4Q16.

Bottom line: BMY is in Wall Street’s penalty box, and it may take some time to get out. This makes a good buying opportunity for patient investors, IMO.

p.s. Share buybacks, which were halted during 4Q16 while BMY/Ono were negotiating the PD-1 patent settlement with MRK, have now resumed.