Bristol-Myers Squibb (BMY) stock crashed to a two-year low Monday after competitor Merck (MRK) unveiled Phase 3 results showing lung-cancer drug Keytruda is twice as effective as chemotherapy, sparking its stock to a breakout.
By the closing bell on the stock market today, Bristol-Myers Squibb stock plunged 10.1% to end trading at 49.81.
Merck stock, on the other hand, lifted as much as 3.3% to a 15-year high near 65, and ended Monday trading up 1.8% to 63.90. Shares briefly hit a 64.10 entry point out of a flat base, adding to a 19% gain since January. New buys, though, are risky in the current volatile market environment.
IBD’S TAKE: Merck stock is in a buy zone, but it’s far from alone. Check out IBD’s Stocks Near Buy Zone to find out which players are recommended bets.
Shares ramped on Merck’s presentation at the 2016 European Society of Medical Oncology conference in Copenhagen. There, Merck unveiled the results of Phase 3 testing for Keytruda, a drug to treat non-small cell lung cancer.
Keytruda, alone, extended progression-free survival to 10.3 months vs. six months with chemotherapy for lung cancer patients expressing a specific type of protein, Merck said.
Merck also combined Keytruda with Eli Lilly‘s (LLY) chemo drug Abraxane. In that study, 55% of patients responded to the combination vs. 29% of patients receiving chemo. Median progression-free survival was 4.1 months longer on the combo.
Bristol-Myers Squibb’s nivolumab, a rival treatment for lung cancer, showed "virtually no benefit," Evercore ISI analyst John Scotti wrote in a research report. That "left investors scratching their heads," he said.
Credit Suisse analyst Vamil Divan expects Merck to take a major leadership position in the lung-tumor market vs. Bristol-Myers, AstraZeneca (AZN) and Roche (RHHBY). Though, he says, Roche might pile on some pressure with its Tecentriq.
Tecentriq has shown an overall survival benefit in second-line lung cancer regardless protein expression, he wrote. He estimates $3 billion in peak sales with a 60% probability of success.
RBC analyst Michael Yee expects Celgene (CELG) to fly on the potential for chemo-combos like the one Merck tested with Keytruda. He sees Celgene growing its revenue if only 30% of the first-line lung cancer patients are treated with chemo-combos.
In other news from the conference, Credit Suisse’s Divan expects Novartis (NVS) to face some pressure post-ESMO. Novartis’ drug to combat metastatic breast cancer is as effective as Pfizer‘s (PFE) Ibrance, but has some serious safety concerns.
"While efficacy appears in line with Ibrance, safety observations of Hy’s law (risk of fatal drug-induced liver injury) and QTc prolongation (mild cardiac arrhythmia) may put the drug at a disadvantage to Pfizer’s Ibrance or Eli Lilly’s Abemaciclib, which may be approved in 2017," he wrote.
Novartis stock lost 0.7% to end Monday trades at 77.75.
Bristol-Myers, Eli Lilly, AstraZeneca, Roche, Pfizer, Novartis and Merck are in IBD’s ethical drugs industry group. The group has been slumping, ranked No. 142 out of 197.