Bristol-Myers: Blockbuster Pipeline?

08/21/2013 7:00 am EST


Charles Carlson

Editor, DRIP Investor

New products are the lifeblood of any industry, and that is especially the case in the pharmaceutical sector, observes Chuck Carlson; in his DRIP Investor, the advisor highlights a holding in his Editor's Portfolio.

Many huge-selling drugs have gone off patent in recent years, leaving gaps in the revenue line for many drug makers to fill.

The good news is that new drug approvals have been accelerating. According to the FDA, 39 new molecular entities were approved in 2012. This is the largest number in 16 years.

New products and the attractiveness of product pipelines will be a major factor shaping Wall Street's opinion of drug stocks, which is good news for Bristol-Myers Squibb (BMY).

The company has one of the more attractive product pipelines in the business, including the possibility of potential blockbusters in the oncology field.

The stock has been a solid performer this year, partly reflecting big expectations for the company's experimental treatment for advance melanoma.

The new class of drugs to treat this cancer is known as PD-1 therapies. The drugs help the patient's immune system to identify and destroy tumor cells that otherwise would evade detection.

The company presented a study of its nivolumab drug at the recent meeting of the American Society of Clinical Oncology. The 86-patient study was treated with nivolumab, along with Bristol-Myers' drug, Yervoy.

In one of the dose combinations tested, several study patients had their tumors shrink by at least 80%. And in a few cases, the tumor disappeared. Some patients in Bristol-Myers' study had their tumors shrink even after they stopped taking the drug.

True, it was a small study, but the results were impressive and led one analyst to say that Bristol-Myers is helping to bring about “the beginning of the end for cancer.”

It is expected that Bristol-Myers Squibb will eventually test the therapy on other forms of cancer, which enhances its blockbuster potential.

Bristol-Myers will need new drugs to help replace the diminished revenue from its Plavix medication, which went off patent in 2012.

Meanwhile, the current yield is more than 3%, so investors get paid nicely while waiting to see if Bristol-Myers' drug pipeline is fruitful.

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