Bristol-Myers Bets on Diabetes and Oncology

01/24/2014 8:00 am EST


Genia Turanova

Editor, Leeb Income Performance

As a group, large pharma has lagged the market; slow growth and expiring patents present a problem not easily solved, explains Genia Turanova, editor of Leeb Income Performance.

Bristol-Myers Squibb (BMY) has performed better than the rest of the group. The company has been able to replace some of its best-selling medicines, with the resulting growth being stronger than that of the two other drug companies we're holding.

One area where Bristol-Myers has excelled is Immuno-Oncology, where it recently presented promising clinical data. Immuno-Oncology is an innovative, and, potentially, revolutionary approach to cancer research that seeks to harness the body's own immune system to fight tumor cells.

Bristol-Myers is at the forefront of this science with several compounds either in development or under investigation for use in a variety of cancers, as well as an approved Immuno-Oncology medicine that is being studied for new uses.

Another strong area for Bristol-Myers is diabetes, and it continues to strengthen its position here.

The relatively recent purchase of Amylin (which the company bought in partnership with AstraZeneca) gave Bristol-Myers a leg-up in the Glucagon-like peptide-1 (GLP-1) space. Amilyn has already been integrated into Bristol-Myers operations.

Moreover, Bristol-Myers is widely expected to get a positive FDA recommendation shortly, for its diabetes treatment Forxiga (already launched in Europe), also a collaboration with AstraZeneca.

Analysts predict that sales of the drug could exceed $1 billion by 2020. The latest quarter showed strong growth in another Type-2 diabetes medicine, Onglyza, with sales up 19% year over year; all said, sales from the diabetes-related drugs totaled $411 million in the latest quarter.

Bristol-Myers trades at a much higher valuation (on a P/E basis) than its pharma peers. This is justified, in our opinion, given its better growth prospects.

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