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Drug Trial Failure Results in Plunge for Bristol-Myers Partner Ono's Stocks

Drug Trial Failure Results in Plunge for Bristol-Myers Partner Ono's Stocks
A lung cancer trial that would have been the basis for widely expanding use of the treatment being conducted by Bristol-Myers Squibb Co. failed which resulted in the fall of Ono Pharmaceutical Co. plunged in Japan trading, the partner in the development of the drug, after the announcement of the failure.
Opdivo is the medicine that the two companies had been planning to commercially market. Opdivo is not approved as a first-line therapy which is a large growth opportunity for cancer drugs but is approved in lung cancer treatment. The stock prices of both the companies have been pushed up due to the positive results on the drug in the past few years. The failed Opdivo trial won’t affect its full-year earnings Ono said in a statement Monday.
In its biggest drop since 1990, there was a drop of 20 percent in the shares of Ono to close at 2,881 yen in Monday trading in Tokyo. Following the announcement on Friday there was a drop of 16 percent, lowest since 2000, in the price of Bristol-Myers shares in New York trading.
Immunotherapy, targeting drugs that leverage the immune system to attack tumors, was the betting point for Bristol-Myers and Ono. Rights to sell the drug in Japan and a few other regional markets and a royalty agreement exist between Ono and Bristol-Myers. Competition from rivals like Merck & Co., AstraZeneca Plc and Roche Holding AG is now open from the results from the latest trial.
Bristol-Myers said in a statement Friday that compared with chemotherapy, its primary goal of lengthening progression-free survival in patients with previously untreated advanced non-small cell lung cancer was not met by Opdivo.
“This was surprising for us, because in all clinical trials conducted thus far Opdivo had demonstrated significantly better results than chemotherapy," Nomura Securities Co. analyst Motoya Kohtani wrote in a note dated Aug. 7.
Melanoma, a type of skin cancer was the first disease for which Opdivo was first approved in Japan in July 2014.
The target price on the stock was reduced by Nomura to 3,800 yen from 6,200 yen. Its projections for peak sales from the drug and earnings projections and were also cut by Nomura. The analyst noted that royalties expected from U.S. sales would also be lower and pricing pressure from the government is expected to continued.
A combination therapies, which could potentially create a better outcome for the group of patients that don’t get results on drugs like Opdivo alone is now the focus of the company, Bristol-Myers Chief Executive Officer Giovanni Caforio said Friday.
With Opdivo and Yervoy drugs on the market for melanoma, lung cancer, Hodgkin’s Lymphoma and renal cancer, Bristol-Myers Squibb has been the leader in the immuno-oncology revolution.
“Market expectations were high, given Merck had positive data in its own study, though used a stringent patient-eligibility criteria, requiring more than 50 percent of tumor cells to show the PD-L1 biomarker," Bloomberg Intelligence senior industry analyst Asthika Goonewardene wrote on August 6. He added that it was a "sensational surprise" that the companies had failed to meet the primary endpoint in the trial.

Christopher J. Mitchell

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