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.

The distinction between big biotech and big pharma has grown increasingly moot as several biotechs have gotten larger than their much older peers.

That might soon happen again, with biotech giant Celgene Corp. approaching the size of big-pharma stalwart Bristol-Myers Squibb Co.

Celgene's growth engine is chugging along. It reported quarterly earnings that trounced expectations on Thursday and raised 2016 sales guidance for its lead blood-cancer drug Revlimid. 

Meanwhile, sales of Bristol's immune-system-boosting cancer drug Opdivo tripled in the latest quarter, but still missed analyst expectations. Bristol topped quarterly earnings forecasts and offered reassuring guidance for 2017, but mainly because of aggressive cost controls. 

Boosted
Both Bristol-Myers and Celgene saw bg share-price jumps after reporting better-than-expected earnings
Source: Bloomberg

Bristol's future rests on Opdivo, which looks shaky after recently flunking a trial in newly diagnosed lung-cancer patients. For Celgene, Revlimid looks as solid as ever, with a diverse and interesting pipeline of drugs behind it.

Life can be volatile for any company that depends heavily on one drug. That describes both of these companies, but Celgene is steadier.

Bristol rode the height of Opdivo-mania to a $127 billion market cap earlier this year, but its recent troubles have slashed its market value to about $87 billion, putting it within striking distance of Celgene's $81 billion. If Opdivo continues to struggle and Celgene continues to execute this well, they might switch places soon. 

Crossing Pattern?
Celgene is within shouting distance of Bristol-Myers' market cap; the gap was as high as $40 billion earlier this year.
Source: Bloomberg

Revlimid seems unstoppable, with sales up 30 percent in the latest quarter from a year ago. Its market share is rising, and U.S. patients are taking the drug for longer periods or even indefinitely, which is a huge boost to sales. The drug is becoming available in more countries, it's still being studied for treating more cancers, and it's being more widely used in combinations with other drugs. 

In Bristol's case, the outlook is murkier. Expectations for Opdivo were sky-high earlier this year as successful trials and new approvals racked up. But the drug's shocking lung-cancer failure, caused by Bristol's overly aggressive trial design, hands a major advantage in a huge -- and increasingly competitive -- market to Merck's rival drug Keytruda. Despite a safety setback for AstraZeneca's competing cancer combo on Thursday, it's clear expectations for Opdivo were much too high.

Estimates for Revlimid's 2020 sales have risen from $10 to 11 billion this year. Forecasts for Opdivo's 2020 sales have fallen by more than $3 billion. 

Hare, Meet Tortoise
Expectations for sales of Celgene's lead drug have steadily risen; hopes for Opdivo boomed then busted this year
Source: Bloomberg

Bristol looks to be increasingly reliant on its cancer-drug franchise. Opdivo and its other immune-boosting drug, Yervoy, are expected to provide half of Bristol's sales by 2022, up from 24 percent this year. In contrast, Revlimid's share of Celgene's total sales is expected to fall to about 54 percent by 2022 from 61.8 percent in the third quarter, even as its sales are expected to rise.

Outside of Eliquis -- a blood-thinner expected to grow sales by $3 billion over the next few years --  it's hard to point to something besides Opdivo that will power Bristol's sales in the near future. Celgene, meanwhile, has several other drugs contributing to sales growth. And its  aggressiveness in partnering with and acquiring other biotechs means it has a number of potential blockbusters in development.  

Celgene shares seem to have room to grow. The stock trades at 12.5 times the next two years' expected earnings, compared with Bristol's 16.1 multiple. 

Valuable
Bristol is currently trading at a higher multiple of future earnings expectations than Celgene
Source: Bloomberg
*based on blended forward earnings estimates for the next two years

Big pharma's virtue is supposed to be its steadiness. But a big biotech has more to offer in this case. 

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