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Pace of Bristol-Myers' cancer trial spooks investors

By Ransdell Pierson

Jan 24 (Reuters) - Bristol-Myers Squibb Co on Friday reported stronger-than-expected quarterly results, but its shares fell because of investors' jitters about the pace at which the company is developing a promising new combination of cancer drugs.

The stock dropped as much as 6.7 percent after company officials said on a conference call with investors that they were not yet planning a late-stage trial that would combine two of its high-profile drugs as a treatment for lung cancer.

Instead, Bristol-Myers said it would continue a mid-stage study of the drugs - an experimental medicine called nivolumab and an approved melanoma treatment called Yervoy - before moving them into a larger Phase III lung cancer trial. Both drugs enhance the immune system's ability to fight cancer.

"Many investors expected Bristol-Myers to rapidly advance the Nivo-Yervoy combo to Phase III, with the plans for such a move perhaps being announced as early as today," BMO analyst Alex Arfaei said in a research note.

The company's slower timetable might be interpreted as a sign of caution or suggest a lack of "synergy" between the two drugs when targeting lung cancer, he said.

Results of the mid-stage trial, called Checkmate-012, are expected to be released at a cancer meeting in late May or early June.

"We believe today's news is incrementally positive for Merck & Co," Arfaei said, which is developing a rival drug in the same PD-1 inhibitor class as nivolumab.

Shares of Bristol were down 3.7 percent at $51.93 in afternoon trading after dropping as low as $50.35. Merck was up 0.2 percent at $51.71 amid a sharp downturn for the broad stock market.


In announcing its fourth-quarter results, Bristol-Myers said it had benefited from cost cuts and growing sales of its treatments for cancer, blood clots and diabetes.

Sales increased sharply for Eliquis, a closely watched new blood clot preventer, but the product is off to a far slower start than Wall Street had hoped.

Eliquis, which is used to prevent strokes among patients with an irregular heartbeat condition called atrial fibrillation, generated sales of $71 million, up from $41 million in the prior quarter.

But when the pill was approved in late 2012, analysts had predicted sales would eventually reach $3 billion to $5 billion a year.

"We're waiting for Eliquis to hit an inflection point, but it hasn't hit that big pop yet," said Morningstar analyst Damien Conover. "It will still get there, to $5 billion."

Eliquis, which Bristol-Myers markets with Pfizer Inc , proved safer and more effective in clinical trials than the standard oral treatment, warfarin, in preventing strokes among patients with atrial fibrillation.

Many patients instead are taking two new blood clot preventers that were approved before Eliquis - Pradaxa from Boehringer Ingelheim and Xarelto from Johnson & Johnson and Bayer AG. But many industry analysts and doctors consider Eliquis to be the best of the new crop of oral agents.

Other Bristol-Myers drugs that stood out in the quarter include Yervoy, whose sales rose 23 percent to $260 million, and leukemia treatment Sprycel, whose sales jumped 30 percent to $365 million. And sales of HIV treatment Sustiva increased 11 percent to $427 million.


The company reported quarterly earnings of $726 million, or 44 cents per share. That compares with $925 million, or 56 cents per share, in the year-earlier period, when it took a big write-off for a failed hepatitis C drug.

Excluding special items, the profit was 51 cents per share, above the analysts' average estimate of 43 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 6 percent to $4.44 billion, topping Wall Street expectations of $4.3 billion.

Marketing, selling and administrative expenses fell 7 percent, and research spending shrank 12 percent.

"Bristol-Myers' execution on cost structure continues to impress, with lower-than-expected spending" that helped the company handily beat earnings estimates, Leerink Swann analyst Seamus Fernandez said.

Bristol said it still expected 2014 earnings of $1.65 to $1.80 per share, excluding special items. The forecast assumes current foreign exchange rates and the closing of a deal with British drugmaker AstraZeneca Plc in the first quarter.

AstraZeneca last month agreed to buy Bristol-Myers' stake in a longstanding diabetes joint venture between the two drugmakers for an initial $2.7 billion, up to $1.4 billion in additional milestone payments, and royalties on net sales through 2025.

The joint venture includes oral medicines Onglyza, Kombiglyze and Forxiga, as well as injectable treatments Bydureon and Byetta.

The sale will give Bristol more funds to invest in other areas, such as cancer.