Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

When you've got a good head start in a race, you don't look back and let anybody catch up. You do your utmost to leave everyone else gasping and demoralized somewhere in the distance. 

Good Earnings, Bad Market
A nice earnings beat from Bristol-Myers Squibb couldn't save it from a broader selloff
Source: Blooomberg
Intraday times are displayed in ET.

Take Bristol-Myers Squibb, which seems to be the runaway leader in a new era in cancer treatment. It was the first to market with a new generation of cancer immunotherapy drugs, medicines that use a patient's immune system to fight cancer. One such drug, Yervoy, was approved way back in March 2011. Its most important drug, Opdivo -- which is expected to make up nearly a third of the company's sales by 2020 -- got the green light at the end of 2014. Those drugs and others helped Bristol-Myers beat fourth-quarter earnings forecasts on Thursday. 

It is risky to be so dependent on one drug for growth. But Bristol-Myers is hardly the only drugmaker tethered to a blockbuster -- not to mention that plenty of competitors would happily take such a problem. And it does have another drug with multi-billion potential in heart treatment Eliquis.  

More impressive than Opdivo's $475 million in sales in the fourth quarter is its staggering rate of new FDA approvals for different uses and its unceasing ability to generate good results from trials. Last year, the drug had seven FDA approvals across three tumor types. Less than a week ago, Bristol-Myers announced the FDA had approved Opdivo for expanded use in treating melanoma.

Thursday morning, it announced a study of the drug in head and neck cancer was stopping early because the survival benefit was so good compared to the control treatment. That helps make the case for rapid FDA approval. CEO Giovani Caforio announced at JPMorgan's health care conference in January that more than 50 trials are underway in approximately 25 tumor types for Opdivo. Data from several studies are expected this year.

In other words, the best is yet to come. Total sales of Opdivo last year were $942 million. This year, consensus estimates are for $2.8 billion, and expectations ratchet further upward for future years. Each new approval puts more distance between Opdivo and the competition, including Merck's Keytruda -- which hit the market just before Opdivo but has fallen behind with narrower approvals and less promising data.

Mega-Mega Blockbuster
Bristol-Myers Squibb's Opdivo is the leader in a drug that's changing cancer care.
Source: Bloomberg
FY 2015 results for Keytruda represent analyst consensus, as do all results 2016 and forward

One big area of opportunity is combination therapy -- pairing a backbone drug like Opdivo with either a different immunotherapy or another type of cancer medicine. The hope, supported by promising data, is that combos of drugs will be able to more effectively attack cancers together, or let Opdivo be used in types of cancer where it's less effective on its own. Bristol-Myers already has the first such combination approved in the U.S.: Opdivo and Yervoy are used together to treat melanoma.

The company also has one of the biggest pipelines of earlier stage, next-generation immune drugs out there. It expects three more to enter clinical trials this year, bringing the total to eight. Those drug candidates have potential as standalone treatments or in potentially lucrative combinations. They also give Bristol-Myers some cover for the future in an area where the science is moving very quickly. 

Still, the company's promise isn't exactly unappreciated. It's the most richly valued of its peers, trading at 26.1 times future earnings estimates, while the competition trades at an average of 16.1 times forward EPS. 

Top of the Pile
Bristol-Myers Squibb is the most richly valued of its big pharma peers on its big future growth prospects.
Source: Bloomberg

The company's biggest threat is Roche, which has a potential Opdivo rival close to market -- which may work better than Opdivo in certain patients -- and is running many clinical trials of its own. It also has a large pipeline of next-generation immune drugs that make it a real threat in combination therapies. Others are close behind. There's always a chance that one of them will find a way to supplant Opdivo. 

But Bristol-Myers' big head start, hard-earned expertise in rapidly expanding Opdivo's reach, and its strong data make life tough for competitors. While other companies will be fighting to get drugs to market in an increasingly crowded field, Opdivo will be raking in billions.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net