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Bristol-Myers Falls as It Cites Drug-Trial Questions

Bristol-Myers Squibb Co. (BMY) plunged the most in 17 months after the drugmaker said it wasn’t ready to move ahead with a study of a combination cancer treatment that includes the company’s top prospect.

Bristol-Myers fell 5.6 percent to $50.94 at 4 p.m. New York time, the biggest one-day drop since August 2012. Investors had been intently watching whether the company would move forward with a final stage trial in lung cancer of the experimental medicine nivolumab and Yervoy, a drug already on the market.

“Based on our assessment of the preliminary data, we will continue the cohorts of patients before beginning a registrational study,” Francis Cuss, the New York-based company’s head of research and development, said on a call with investors. “We’ll certainly know a lot more about nivolumab a year from now.”

The drug is being tested in lung, skin, kidney and other cancers. It could be used alone or in combination with the company’s first immune system-based cancer treatment, Yervoy. Investors have been keen on the possibility that combining nivolumab and Yervoy may be a potent therapy to fight cancer and to boost sales.

The drugs’ potential has led Bristol-Myers’s shares to gain 42 percent in the 12 months, more than any competitor.

Photographer: Noriyuki Aida/Bloomberg

Bristol-Myers Squibb Co. Chief Executive Officer Lamberto Andreotti. Close

Bristol-Myers Squibb Co. Chief Executive Officer Lamberto Andreotti.

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Photographer: Noriyuki Aida/Bloomberg

Bristol-Myers Squibb Co. Chief Executive Officer Lamberto Andreotti.

High Valuation

“We’ve got a hold rating on Bristol, because we’ve got a valuation that can’t be supported without overly strong nivo and Yervoy” sales, said Judson Clark, an analyst with Edward Jones & Co. “At this point it looks like the estimates have almost fully baked in success.”

Other analysts called today’s stock drop a buying opportunity. The comments by Bristol-Myers’s R&D chief “spooked the market,” said Leerink Partners analyst Seamus Fernandez, yet don’t change the underlying promise for the drugs. “Comments about how they move forward before beginning registrational studies is far from a failed outcome,” he said in a note to clients. “We’re buyers.”

Earlier, the company reported fourth-quarter earnings that topped analysts’ estimates.

Profit excluding certain items was 51 cents a share, beating by 8 cents the average of 15 analysts’ estimates, according to data compiled by Bloomberg. Revenue increased to $4.44 billion from $4.19 billion a year earlier, the drugmaker said in a statement. That topped by $116 million the average analyst projection.

Bristol-Myers is putting its biggest effort on cancer after a strategic overhaul last year. The company is furthest along in an industrywide shift to divest non-drug units, trim research programs and focus on therapies where patients don’t have good options such as rare diseases or the science is progressing fastest.

Company Focus

“When you realize you are the furthest down the path of these cancer drugs, it makes sense to make that your focus,” Clark said in a telephone interview. “They’re taking cues from what shareholders have told them they want, which is ’Let me diversify my own pipeline the way I want, and you focus on your area.’”

The drugmaker said in November it was ending research in diabetes, hepatitis C and neuroscience to put more resources into a new generation of therapies that use the body’s own immune system to kill cancer cells. Last month, the company agreed to sell its diabetes business stake to venture partner AstraZeneca Plc for as much as $4.3 billion.

Net income attributable to Bristol-Myers declined to $726 million, or 44 cents a share, from $925 million, or 56 cents, a year earlier when the company recorded a tax benefit.

R&D Costs

Research and development costs fell 12 percent to $957 million from a year earlier, largely due to the end of clinical trials and projects. Lower costs from the research overhaul announced in November won’t affect results until later this year, the company said. The same is true of increased spending the company anticipates to help introduce new cancer drugs.

Bristol-Myers reported Yervoy sales rose 23 percent to $260 million in the fourth quarter, about $3 million below analysts’ estimates.

“This is understandable -- and deserved -- because the company has delivered various pipeline successes over the last several years and sits at the forefront of the exciting ‘immuno-oncology’ area,” Timothy Anderson, an analyst with Sanford C. Bernstein & Co., said in a note to clients.

Revenue from Bristol-Myers’s top drugs also grew in the fourth quarter, fueled by an 11 percent increase in overseas sales, the company reported. Sustiva, a treatment for HIV, rose 11 percent to $427 million. Orencia, a medicine for rheumatoid arthritis, generated an increase of 22 percent to $397 million.

Drug Sales

Sales of Abilify, an anti-psychotic drug that is the company’s biggest seller, fell 22 percent to $635 million, because of a new agreement with partner Otsuka Holdings Co. that gives Bristol-Myers less revenue from the medicine.

Eliquis, a new blood thinner sold with New York-based Pfizer Inc. (PFE), generated $71 million. The pill is one of three new drugs that may replace warfarin, a decades-old, less-convenient treatment to prevent blood clots and strokes. Projected by analysts to be a blockbuster, initial sales have been slow and the companies have overhauled promotional efforts. Bristol-Myers has said it has no plans to divest its stake in the drug or sell it to Pfizer.

The two companies last year started a direct-to-consumer ad campaign for the drug, and Bristol-Myers reported total spending on advertising and product promotion rose 20 percent to $254 million in the fourth quarter.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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