Pace of Bristol-Myers' cancer trial spooks investors

Reuters - UK Focus

By Ransdell Pierson

Jan 24 (Reuters) - Bristol-Myers Squibb Co on Fridayreported stronger-than-expected quarterly results, but itsshares fell because of investors' jitters about the pace atwhich the company is developing a promising new combination ofcancer drugs.

The stock dropped as much as 6.7 percent after companyofficials said on a conference call with investors that theywere not yet planning a late-stage trial that would combine twoof its high-profile drugs as a treatment for lung cancer.

Instead, Bristol-Myers said it would continue a mid-stagestudy of the drugs - an experimental medicine called nivolumaband an approved melanoma treatment called Yervoy - before movingthem into a larger Phase III lung cancer trial. Both drugsenhance the immune system's ability to fight cancer.

"Many investors expected Bristol-Myers to rapidly advancethe Nivo-Yervoy combo to Phase III, with the plans for such amove perhaps being announced as early as today," BMO analystAlex Arfaei said in a research note.

The company's slower timetable might be interpreted as asign of caution or suggest a lack of "synergy" between the twodrugs when targeting lung cancer, he said.

Results of the mid-stage trial, called Checkmate-012, areexpected to be released at a cancer meeting in late May or earlyJune.

"We believe today's news is incrementally positive for Merck (Dusseldorf: 6MK.DU - news)& Co," Arfaei said, which is developing a rival drug inthe same PD-1 inhibitor class as nivolumab.

Shares of Bristol were down 3.7 percent at $51.93 inafternoon trading after dropping as low as $50.35. Merck (Other OTC: MKGAF - news) was up0.2 percent at $51.71 amid a sharp downturn for the broad stockmarket.

ELIQUIS SALES JUMP

In announcing its fourth-quarter results, Bristol-Myers saidit had benefited from cost cuts and growing sales of itstreatments for cancer, blood clots and diabetes.

Sales increased sharply for Eliquis, a closely watched newblood clot preventer, but the product is off to a far slowerstart than Wall Street had hoped.

Eliquis, which is used to prevent strokes among patientswith an irregular heartbeat condition called atrialfibrillation, generated sales of $71 million, up from $41million in the prior quarter.

But when the pill was approved in late 2012, analysts hadpredicted sales would eventually reach $3 billion to $5 billiona year.

"We're waiting for Eliquis to hit an inflection point, butit hasn't hit that big pop yet," said Morningstar (NasdaqGS: MORN - news) analyst DamienConover. "It will still get there, to $5 billion."

Eliquis, which Bristol-Myers markets with Pfizer Inc (NYSE: PFE - news) , proved safer and more effective in clinical trials thanthe standard oral treatment, warfarin, in preventing strokesamong patients with atrial fibrillation.

Many patients instead are taking two new blood clotpreventers that were approved before Eliquis - Pradaxa fromBoehringer Ingelheim and Xarelto from Johnson & Johnson (NYSE: JNJ - news) and Bayer AG (Milan: BAY.MI - news) . But many industry analysts and doctorsconsider Eliquis to be the best of the new crop of oral agents.

Other Bristol-Myers drugs that stood out in the quarterinclude Yervoy, whose sales rose 23 percent to $260 million, andleukemia treatment Sprycel, whose sales jumped 30 percent to$365 million. And sales of HIV treatment Sustiva increased 11percent to $427 million.

COST CUTS DELIVER

The company reported quarterly earnings of $726 million, or44 cents per share. That compares with $925 million, or 56 centsper share, in the year-earlier period, when it took a bigwrite-off for a failed hepatitis C drug.

Excluding special items, the profit was 51 cents per share,above the analysts' average estimate of 43 cents, according toThomson Reuters I/B/E/S.

Revenue rose 6 percent to $4.44 billion, topping Wall Streetexpectations of $4.3 billion.

Marketing, selling and administrative expenses fell 7percent, and research spending shrank 12 percent.

"Bristol-Myers' execution on cost structure continues toimpress, with lower-than-expected spending" that helped thecompany handily beat earnings estimates, Leerink Swann analystSeamus Fernandez said.

Bristol said it still expected 2014 earnings of $1.65 to$1.80 per share, excluding special items. The forecast assumescurrent foreign exchange rates and the closing of a deal withBritish drugmaker AstraZeneca Plc (NYSE: AZN - news) in the first quarter.

AstraZeneca last month agreed to buy Bristol-Myers' stake ina longstanding diabetes joint venture between the two drugmakersfor an initial $2.7 billion, up to $1.4 billion in additionalmilestone payments, and royalties on net sales through 2025.

The joint venture includes oral medicines Onglyza,Kombiglyze and Forxiga, as well as injectable treatmentsBydureon and Byetta.

The sale will give Bristol more funds to invest in otherareas, such as cancer.

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