(Reuters) – Investors betting that Bristol-Myers Squibb will emerge as the leading player in a hot new class of cancer drugs hit the pause button on Tuesday as a rival therapy from Merck & Co showed much higher sales.

Bristol shares fell as much as 2.7 percent and closed off 1 percent after reporting sales of Opdivo, a therapy that helps the immune system fight cancer, totaled $40 million in the first quarter of the year. That was below Wall Street forecasts of $50 million.

Merck said its Keytruda treatment had quarterly sales of $83 million, topping Wall Street estimates of about $70 million, helped by early compassionate use patients converting to paying customers following approval.

“When investors saw Opdivo’s number was below Keytruda’s, that caused concern,” said John Boris, an analyst with Suntrust Robinson Humphrey. Merck shares closed up 5 percent, though the gains were mostly attributed to positive new safety data on its top-selling Januvia diabetes treatment.

Boris and other industry analysts said the early sales data represent only the first skirmish in a long battle for market share between Bristol-Myers and Merck. Some expect both drugs will eventually generate billions of dollars in annual sales, particularly if proven effective against other forms of cancer.

In addition, excitement over Bristol-Myers’ cancer treatments have pushed shares to trade at 28.5 times expected 2016 per share earnings, Boris said. That compares with a multiple of 15.1 for Merck and 17.6 for the pharmaceutical sector.

“Based on price per fundamentals, we like the value of Merck versus Bristol at the moment,” said Les Funtleyder, healthcare portfolio manager for ESquared Asset Management, which currently holds Merck but not Bristol shares.

Ori Hershkovitz, a managing partner at Nexthera Capital in New York, said Bristol-Myers is trading more like a high-flying biotech.

“The minute biotech gets pummeled, Bristol bears the brunt,” he said, noting biotech stocks have retreated sharply in recent weeks on fears they were overly inflated.



Opdivo was approved in December to treat advanced melanoma. In March, it received clearance to treat a common form of lung cancer, giving Bristol an early-mover advantage in a much larger market.

Keytruda has been approved for advanced melanoma since September and awaits regulatory approval in lung cancer.

Both drugs work by blocking a protein called PD-1, helping the immune system recognize and destroy cancer cells. Roche Holding AG, AstraZeneca Plc and Pfizer Inc are also developing similar treatments.

Boris forecast Opdivo annual sales reaching $7 billion by 2020 and said Tuesday’s weakness in Bristol shares represents a buying opportunity. Opdivo has been shown to prolong survival in melanoma and lung cancer, according to clinical trial data.

Keytruda has not yet demonstrated a survival benefit but is expected to do so in coming trials. Boris predicted it will capture annual sales of $3.7 billion by 2020.

Bristol Chief Scientific Officer Francis Cuss told analysts on Tuesday that strong data on Opdivo along with the U.S. approvals in lung cancer and melanoma and expected European approval “really puts us in a very strong competitive position.”

The company recently reported strong results from a combination of Opdivo and its older immunotherapy Yervoy in advanced melanoma. It plans to apply for approval of the combination therapy by mid-year.

Merck head of global human health, Adam Schecter, told analysts that the market will be big enough to handle several competitors, “so I don’t think it should be looked at as one company versus the other.”

Pfizer is racing to catch up with Merck and Bristol-Myers, by beginning late-stage trials this year of its PD-1 inhibitor and conducting trials of four other immuno-oncology drugs.

PD-1 treatments “will be the workhorses for the foreseeable future, but they will need to be added to standard therapies or to (other) immuno-oncology treatments,” Pfizer Chief Executive Ian Read said in an interview. “That’s where the market will be, and we will be well positioned with those combination agents.”


(Reporting by Ransdell Pierson and Bill Berkrot, editing by Michele Gershberg and Andrew Hay)

Source: Reuters Health