Bristol-Myers Squibb Co. (BMY:US) lost ground in the race to develop a stand-alone hepatitis C pill after the company suspended testing of an experimental drug that cost it $2.5 billion to acquire earlier this year.
Bristol fell the most (BMY:US) in 10 years after the New York-based company said yesterday it wouldn’t continue to administer the therapy, known as BMS-986094, after a patient developed heart failure, what the drugmaker called a “serious safety issue” in a statement.
The treatment was thought by researchers and analysts to be a key player in a push by companies, including Gilead Sciences Inc. (GILD:US), to replace the standard treatment, a yearlong regimen of interferon injections that carry flu-like side-effects. Two analysts called the news a major setback blunting Bristol’s reputation as having the industry’s best pipeline.
“We recommend that investors assume BMY’s nuc is dead,” said Mark Schoenebaum, an analyst with ISI Group in New York, using industry slang for nucleotide polymerase inhibitor, a family of compounds designed to stop the virus from replicating.
Bristol fell 8.6 percent to $32.55 at 4 p.m. New York time, after gaining (BMY:US) 27 percent in the 12 months before today. It was the worst one-day drop since April 2002. Gilead jumped 6.8 percent to $57.29. The Foster City, California-based company has increased 42 percent in the past 12 months.
Bristol gained the compound in January with the acquisition of Inhibitex Inc. for $2.5 billion. The purchase was designed to put the company in a lead role in gaining approval of a new generation of medicines to treat the estimated 170 million patients with hepatitis C.
The hepatitis C market is estimated at $20 billion for the new pills designed to work more quickly with fewer side effects for those with the liver infection.
The hepatitis C setback was announced the day before a Bristol executive responsible for overseeing the company’s pension plans was arrested for insider trading, according to a Federal Bureau of Investigation complaint. Robert Ramnarine was arrested today and will appear in federal court in Newark, New Jersey, according to a statement by U.S. Attorney Paul Fishman.
Last month, another of the company’s experimental prospects, the blood thinner Eliquis being developed with Pfizer Inc., was rejected by U.S. regulators, who asked for more data from existing trials. Approval of the drug may be pushed into next year, according to the company. And the diabetes drug dapagliflozin was rejected in January when the Food and Drug Administration asked for more safety information.
Timothy Anderson, an analyst with Sanford C. Bernstein & Co. in New York, said in a note to clients today that he was cutting his estimate (BMY:US) of 2016 sales of Bristol-Myers’ hepatitis C franchise from $2 billion to $1.2 billion.
Anderson also cautioned that the heart failure could prove to be a red herring, and that more information was needed.
“Sometimes companies take the conservative step of suspending dosing when new safety issues arise until the data can be analyzed and excessive harm can be ruled out,” he said.
Bristol-Myers’ strategy has been focused on buying companies with promising experimental assets and focusing internally on areas of unmet medical need. The goal has been to rebuild a diversified company that no longer relies as heavily on Plavix, a cardiology drug that lost patent protection this year after selling $7.09 billion in 2011 and making up a third of the company’s revenue.
“This is perhaps yet another chink in the armor of a relatively expensive stock that has earned its multiple via R&D and business development successes,” Schoenebaum said in a note to clients. He predicted the stock would drop. “We expect to continue to see BMY lag the group as it has much if this year.”
It’s also a boost for Gilead and Vertex Pharmaceuticals Inc. (VRTX:US), which both have competing drugs. “In the near term, this may remove a major competitor until the safety issue is vetted and at a minimum may put clinical ‘hair’ on the molecule,” Michael Yee, an analyst with RBC Capital Markets in San Francisco, said in a note to clients.
Administration of the drug to about 30 patients enrolled in a so-called Phase 2b study has been stopped pending an investigation, Sonia Choi, a Bristol-Myers spokeswoman, said in a telephone interview yesterday.
Heart failure occurred in one patient receiving the highest daily dose of 200 milligrams, Choi said.
“Although the issue presented in a patient receiving that dose, it doesn’t preclude the possibility of issues with other patients at other doses,” she said. “At this point, we don’t know what the cause of the safety issue is. We are taking the time to evaluate information on all patients receiving this compound.”
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