Bernstein Says Merck's Lung Cancer Drug Will Lead The Market Near-Term, But Long-Term Market Share Harder To Predict

Tim Anderson, MD, a senior analyst at Bernstein, took a deep dive into Bristol-Myers Squibb Co BMY's announcement last Friday that its Checkmate-026 trial exploring the cancer fighting drug Opdivo in 1L lung failed.

Related Link: Bristol-Myers Hit With A Trio Of Analyst Price Target Cuts

Anderson stated that "much is still unknown" because data from Bristol-Myers' trial has yet to be presented. The analyst added that more important than just the headline release is the pending subgroup analysis of Checkmate-026 which explores whether Opdivo demonstrated an efficacy benefit over chemotherapy in the highest PDL1 expressers - similar to what Merck & Co., Inc. MRK demonstrated in its similar Keynote-024 trial.

Anderson continued that Brisol-Myers could still receive a "compendia listing" for its drug which "would garner the company some market share in the 1L setting."

The analyst added, "Beyond this data set, it is also important to know how PDx/CTLA4 (BMY and AZN) and PDx/chemotherapy (many companies) combination trials read out – much of this should begin to surface in 2017. On the former, the analyst community widely expects positive results and argues this will salvage BMY's efforts in 1L lung. However, Friday's news teaches that the industry is still moving up the IO learning curve, meaning that surprises (both positive and negative) can occur."

Anderson further stated there are too many unknowns and predicting the longer-term market share winner is a "challenger." However, the near-term picture is "clearer" as Merck's drug will become the market leader in 1L lung at the expense of Bristol-Myer's. In fact, Merck's ramp in 1L lunch "should be fast" and "this will manifest first in the US, with an inflection point almost certainly occurring before year-end."

Shares of Merck remain Outperform rated with a price target raised to $74 from a previous $66.

Shares of Bristol-Myers remain Market Perform rated with a price target lowered to $65 from a previous $79.