Bristol-Myers Stock May Have Exhausted Its Upside For Now

Jefferies said in a note Monday that upside asymmetry for Bristol-Myers Squibb Co (NYSE:BMY) is exhausted at current levels, with shares having already discounted M&A spec and biopharma flows. This, according to the firm, leaves significant downside risk if current study CM-227 fails.

CM-227 is a randomized, open-label late-stage study of Bristol-Myers Squibb's nivolumab, nivolumab plus ipilimumab or nivolumab plus chemotherapy against chemotherapy in chemotherapy-naïve patients with advanced non-small cell lung cancer.

Further, the firm said other consolidation targets such as AbbVie Inc (NYSE:ABBV) may have become attractive, potentially threatening the downside protection.

As such, Jefferies downgraded shares of the company from Buy to Hold and nudged down its price target from $72 to $71.

Model Updated

Analysts Jeffrey Holford and David Gu lowered their estimates for Eliquis and Opdivo in head and neck cancer, partially offset by higher near-term Opdivo estimates in other marketed indicated. Consequently, the analysts lowered their revenue estimates by 1-3 percent and earnings per share estimates by 1-5 percent during 2017-2020.

Though the analysts said they were generally in line with consensus estimates for 2017-2020, they said earnings per share estimates for 2021 were 9 percent above the consensus due to higher Eliquis and Yervoy estimates.

Increased Visibility Sought

Jefferies said it needs to have either better visibility on the potential of Opdivo/Yervoy in NSCLC, or new drivers for the pipeline to raise its valuation.

The firm listed the following as key catalysts:

• CM-227 expressor data in 1L NSCLC due in the fourth quarter of 2017 or the first half of 2018.
• CM-451 and CM-331 PIII data in SCLC.
• CM-459 PIII data in 1L HCC.
• R&D updates on the non-PD-1 IO portfolio and non-IO assets such as BMS-986036, BMS-986165, BMS-986142, CXL-1427.

Upside/Downside Scenario

If CM-227 reads out positively, the firm sees significant potential for the shares to trade up to $82, although it accorded only 50 percent probability for this. However, if the CM-227 and the NSCLS program fail, with Eliquis only meeting consensus estimates, the firm sees the shares immediately trade down to $48.

"Investors should consider that the impact of the downside scenario to the shares would likely be immediate, whereas detailed data from CM-227 may be required at a future medical conference to fully crystallize the upside valuation," the firm concluded.