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Expert Financial Analysis and Reporting

Price Drop Following Side Effect Issue with Hepatitis C Pipeline Drug Creates Buying Opportunity

Bristol-Myers disclosed on August 1, 2012 that it has suspended a phase II trial in hepatitis C in which BMS-986094, its nucleotide polymerase inhibitor, was being studied in combination with daclatasvir, its NS5a inhibitor. BMS-986094 has been broadly viewed as the cornerstone of BMY’s effort to develop an all oral combination treatment for hepatitis C and was the reason that BMY paid $2.9 billion to acquire Inhibitex.


In this study, one patient developed congestive heart failure; this must be explored in greater detail, but it does not look good for ‘094. The onset of congestive heart failure was sudden which probably rules out a natural occurrence unrelated to the drug. Also, it is unlikely that daclatasvir was at fault as it has been studied in over 2200 patients without seeing this side effect. About 250 patients have been treated with ‘094. It will take some time to come to a firm conclusion, but I think that the odds favor ‘094 being dropped from further clinical development.


I have considered BMY as having the best pipeline in the industry and even with the loss of ‘094, I continue to feel that this is the case. The importance of ‘094 was that when combined with other oral agents, the combination had the potential to develop several billion dollars of sales in the latter part of this decade. I carried no estimates for sales of these new hepatitis C treatments through 2016 and most Wall Street analysts either had no sales contribution or only minimal sales in the 2015 or 2016 period.  I think that BMY will still be a player in HCV therapy, but the potential may be more on the order of $500 million to $1 billion instead of several billions. I think that today’s 8% drop in the stock price accurately reflects this loss and I consider this a buying opportunity.

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