Follow Us GraphicFacebook IconTwitter IconLinkedIn Icon
Search Graphic

Expert Financial Analysis and Reporting

Ipilimumab’s Approved Indications Exceed Expectations (BMY, $26.93)

I was expecting approval of ipilimumab for patients who had failed prior therapy. I was surprised that the FDA also approved it for treatment naive patients. The price of $120,000 for a course of therapy exceeded my projection of $50,000 to $60,000.


Key Points

The FDA approval of Bristol-Myers Squibb’s new oncology drug Yervoy (ipilimumab) on Friday, March 25, 2011, produced a number of positive surprises. Highlights of the approval were as follows:

  1. First of all, an outright approval for a drug on its PDUFA date as opposed to a Complete Response Letter is a rare and surprising event given the current modus operandi of the FDA.
  2. Secondly, ipilimumab was approved for all patients suffering from metastatic cancer, both those who are treatment naïve and those who had failed previous therapy. It was our expectation that it that it would only be approved for patients who had failed prior therapy. However, the labeling instructions are consistent with the 020 trial as it pertains to dosing.
  3. BMY priced the drug at $120,000 for a course of therapy versus our expectation of $50,000 to $60,000.
  4. There is a black box warning on side effects and a REMS program.

Conclusions and Opinions

We take the FDA action as a strong vote of confidence in ipilimumab and its role in metastatic melanoma. There are troublesome side effects associated with ipilimumab, which had given us concern as to how the FDA would elect to deal with them. However, the FDA’s actions unequivocally show that it believes the therapeutic benefit of the drug far outweighs the risks. This FDA stamp of approval in conjunction with the strong clinical trial data and lack of therapeutic alternatives convinces us that the uptake of the drug will be rapid and that it will penetrate a high percentage of the addressable market. There are few clinical reasons for a physician not to use the drug and the only real point of concern is the eye catching price tag as has been the case with Provenge. However, unlike the situation with Provenge in castration resistant prostate cancer where there other possible treatment options, there are no viable options other than Yervoy in metastatic melanoma.  


The estimates I have seen place the annual US incidence of melanoma at about 70,000 cases per year. Of these most are in situ tumors that have not metasticized and can be treated surgically. However, in about 12% of the cases the cancer has metastasized which means that about 8,400 patients are eligible for Yervoy therapy each year. The addressable US market for Yervoy at this new price point is about $1 billion. We do not think that the high price point will be a major deterrent to Yervoy use and think that it can reach 70% of the US addressable market in five years. This results in a US sales estimate in 2016 of $700 million.


The foreign addressable market is estimated to be two times the size of the US so that the worldwide addressable market for Yervoy is $3 billion. We think that foreign penetration will be lower in five years at perhaps 55% resulting in foreign sales of $1.1 billion in five years. Based on this reasoning we are raising our 2016 worldwide sales estimates from $1.2 billion to $1.8 billion.


We are also encouraged that because ipilimumab’s mode of action is not specific to melanoma (it essentially blocks the natural mechanism that down regulates T-cells and in doing so enhances the body’s immune response against cancer) it may have a broad role to play in other cancers. It is currently in trials in the following major indications:

  1. Adjunctive therapy to in melanoma resection; trial completion in September or 2015,
  2. Second line therapy in castration resistant prostate cancer; trial completion in December 2012,
  3. First line therapy in squamous histology non small cell lung cancer; trial completion in January 2015.


Success in these trials and others could enormously expand sales from the $1.8 billion we are estimating for metastatic melanoma in 2016. However, before we start making sales estimates for these new indications, we would like to see positive data from the clinical trials.


Investment Opinion

Bristol-Myers has issued guidance that it will achieve minimum EPS of $1.95 in 2013 so that the P/E based on this guidance is 14. BMY will be entering its patent cliff period in 2012 and 2013 so that sales may reach their low point in 2013 and could begin to increase in 2014 and 2015 and with it, earnings should also begin to grow. The year 2013 should be the trough year for EPS. Supporting the investment merits of BMY is a current dividend of $1.32 that translates into a 4.84% dividend yield. This dividend should be sustainable.


The pipeline for Bristol-Myers Squibb is simply outstanding and there will be a cascade of approvals and clinical news in 2011 in addition to the Yervoy approval that could overcome the concern with the patent cliff. There are still significant clinical, regulatory and commercialization risks with all of the new products. It is hard to imagine that there will not be some road bumps along the way for some or all of these products. While I have not bought the stock for my own account, it could be an interesting purchase for investors looking for a good dividend yield who have the patience to hold through the patent cliff period.


Efficacy Has Never Been the Question

Investors knew that the efficacy data of the”020” study, which was the basis of the NDA filing, was outstanding. It showed that median survival in both the Yervoy and Yervoy plus gp 100 arms was 10 months versus 6 months in the gp 100 alone arm and that p values (not adjusted for multiple comparisons were powerful at 0.0026 and 0.0004 for Yervoy and Yervoy plus gp 100 versus gp 100. (Please refer to my note of March 22 called “Bristol-Myers Squibb: PDUFA Date Looms for Ipilimumab” for a description of this unusual trial design which had no pure placebo arm.


The Kaplan-Meier curves for this trial estimated that the survival rate at one year was 46% for the two Yervoy containing arms versus 25% for gp 100 and at two years it was 24% for the Yervoy containing arms versus 14% for gp 100. In its press release, BMY referred to data from a meta-analysis of 42 Phase II and III trials of more than 2,100 previously-treated and treatment-naive patients with Stage IV metastatic melanoma conducted by multiple cooperative groups from 1975-2005. The 1-year mortality rate in this meta-analysis was 75% versus 46% in the Yervoy arms of the 020 study. This is a different and encouraging way to judge the survival benefit of Yervoy.


Safety Issues Caused Uncertainty

There were significant safety issues with ipilimumab which resulted in drug related deaths in the 020 trial. The mechanism by which Yervoy induces activity, the proliferation of T-cells, also leads to serious side effects. There were seven drug related deaths in the 020 study, five in Yervoy plus gp 100 arm and two in the Yervoy alone arm. As investigators learned how to detect the symptoms of immuno-related adverse reactions sooner, management could be introduced earlier, and there was a better chance of averting severe side effects. The incidence of toxicity diminished as more was learned about detecting adverse events at an early stage and preventing or managing them.


I was concerned that the FDA would put more stress on the safety issues and ask for more time to evaluate the nature of these side effects and how to control them. However, it seems that the FDA made a reasoned risk reward judgment and decided to approve the drug. It handled the side effect issue with a black box warning as follows:


“YERVOY can result in severe and fatal immune-mediated adverse reactions due to T-cell activation and proliferation. These immune-mediated reactions may involve any organ system; however, the most common severe immune-mediated adverse reactions are enterocolitis, hepatitis, dermatitis (including toxic epidermal necrolysis), neuropathy, and endocrinopathy. The majority of these immune-mediated reactions initially manifested during treatment; however, a minority occurred weeks to months after discontinuation of YERVOY (ipilimumab). Permanently discontinue YERVOY and initiate systemic high-dose corticosteroid therapy for severe immune-mediated reactions. Patients should be assessed for signs and symptoms of enterocolitis, dermatitis, neuropathy and endocrinopathy and clinical chemistries should be evaluated, including liver function tests and thyroid function tests, at baseline and before each dose.”


Price Is Higher Than Expected

The recommended dosage of ipilimumab is 3 mg/kg given as an IV infusion for 90 minutes. The label calls for four doses to be given at three week intervals. BMY is pricing each dose at $30,000 per dose so that the total cost for a full course of therapy is $120,000. I thought that BMY might be deterred by the furor over Dendreon pricing Provenge at $93,000 for a course of therapy. I also speculated that there are likely to be additional costs incurred for Yervoy to deal with side effect issue. As a result, I thought that BMY would price the drug at $50,000 to $60,000 for a course of therapy. I was wrong. BMY seems to feel that because of the strong efficacy results and the fact that there are no other drugs that can provide a survival benefit in metastatic melanoma, the price could be justified. It will certainly create some controversy.


Approved for All Forms of Metastatic Melanoma

BMY also conducted a trial in treatment naïve patents which compared ipilimumab to decarbazine in treatment naïve patients called 024. Remember that the 020 study was in patients who had previously been treated. On March 21, BMY announced that 024 had met its primary endpoint of overall survival, but released minimal data pending presentation at an upcoming conference, probably ASCO in May

I had though that this might mean that approval could be delayed beyond the March 26 PDUFA date based on the reasoning that the FDA would want to look at the 024 data before approving ipilimumab. This judgment was also wrong. I was surprised that not only did the FDA not need to look more closely at the 024 data; they actually expanded the label to include first line melanoma. This is again evidence of a very positive scientific judgment on the part of the FDA about the favorable risk reward ratio for the drug. Probably, BMY submitted the 024 data to FDA earlier this year for their analysis before they announced completion of the trial to investors.

Disclosure: The author of this article owned shares of Dendreon at the time this note was written. This should be taken into account as it may introduce bias into the conclusions and interpretations that are made. In reading this note, you acknowledge that you have not used it as the sole basis of your decision making and that all investment decisions are based on your own analysis. An investment in Dendreon carries substantial risk and investors could potentially lose much of their investment. The reader acknowledges that he/she has carefully read the Investment Approach, Terms/Conditions and Disclosures sections in the About Us section of the website. The reader acknowledges that he/she will not hold SmithOnStocks accountable for any investment loss that may be incurred if a decision is made to invest in Dendreon.












Tagged as + Categorized as Company Reports


You must be logged in, or you must subscribe to post a comment.