Bad News for Bristol-Myers

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Bristol-Myers Squibb Company (BMY) recently suffered a pipeline setback when it announced the discontinuation of the development of its hepatitis C candidate, BMS-986094 (formerly known as INX-189) due to a safety issue. Earlier this month, Bristol-Myers had voluntarily suspended a phase II study following heart failure of a patient in the trial. The patient subsequently died.

Following the safety concern and Bristol-Myers’ voluntary action, the US Food and Drug Administration (:FDA) put the candidate on clinical hold. We remind investors that BMS-986094 was added to Bristol-Myers’ pipeline following its acquisition of Inhibitex Inc. earlier this year.

Bristol-Myers reported that nine patients from the study have been hospitalized to date (including the patient who died). Two patients are still in hospital. Even though the causes of these adverse events have not yet been exactly identified, the pharma major voluntarily suspended the trial keeping in mind the safety of the patients.

Bristol-Myers is working with the FDA on the issue and further announced that it will recognize a charge of $1.8 billion in its third quarter earnings results, as a result of the termination of the development of BMS-986094.

Bristol-Myers intends to share the data from the phase II study with other companies developing hepatitis C candidates. We remind investors that Bristol-Myers is not the only company to have suffered a hepatitis C related pipeline setback. Earlier this month, Idenix Pharmaceuticals, Inc. (IDIX) received a verbal notice from the FDA placing a partial clinical hold on its hepatitis C candidate, IDX184.

We note that Bristol-Myers has encountered quite a few pipeline setbacks this year. In July 2012, Bristol-Myers’ brivanib performed disappointingly in a phase III study (BRISK-FL) in the hepatocellular carcinoma indication.

Moreover, in June 2012, the company suffered a regulatory setback when the FDA declined to approve Bristol-Myers/Pfizer’s (PFE) anti-clotting drug Eliquis (apixaban) on the basis of the submitted data and issued a complete response letter.

Such pipeline/regulatory setbacks pose major challenges as Bristol-Myers aims to recoup from the loss of exclusivity of blockbuster blood-thinner Plavix in the US on May 17, 2012. The genericization of Plavix, co-developed with Sanofi (SNY), has caused significant revenue losses for Bristol-Myers.

Our Recommendation

We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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