Bristol-Myers: Dynamic Turnaround?

02/06/2015 7:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

With a history reaching back into the late 19th century, this featured recommendation has skillfully navigated numerous twists and turns in the pharmaceutical industry, explains Stephen Leeb, editor of The Complete Investor.

In the past few years, in common with many drug companies, Bristol-Myers Squibb (BMY) saw profits decline as patents on some its top-selling drugs expired.

But today, it's on the verge of one of the most dynamic turnarounds in its storied history, as investors anticipate the company shooting to the lead in the area of oncology.

Bristol-Myers is first out of the box with a new drug able to treat a wide variety of cancers. Nivolumab (brand name Opdivo) attacks cancer by enhancing a patient's own immune system.

Cells in our immune system are programmed to self-destruct to avoid overreacting, leading to many autoimmune disorders such as Crohn's disease.

One way that cancer operates is to make cells that accelerate this destructive process. Opdivo combats this by inhibiting cells that cause the death of immune cells, thereby permitting a patient's immune system to fight cancer cells more actively.

And since Opdivo works only when cancer cells are present, it eliminates the side effects that can result from a too-active immune system.

Opdivo leap-frogged over competing drugs recently, when, just several months into a trial, it was approved to treat advanced melanoma, a disease with a nearly 100% mortality rate.

The drug was also granted orphan status as a one-of-a-kind treatment for melanoma.

The exceptional success of Nivolumab in treating melanoma strongly suggests it will be comparably successful with a broad variety of cancers including lung cancer and various lymphomas.

Potential revenues from the drug could easily exceed $10 billion a year within the next five to seven years.

While oncology is likely to be Bristol-Myers's fastest-growing area, the company also has a hepatitis C franchise outside the US along with HIV drugs that should contribute solid revenues for at least the next several years.

Finally, the company has a very active cardiovascular research program. Some potential drugs are even candidates for orphan status given their unique properties.

Investors can also expect growing dividends on top of an already decent yield. Bristol-Myers Squibb shapes up as one of the highest quality and most dynamic stocks around and one that all investors should own.

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