Bristol-Myers Squibb’s Opdivo May See Strong Demand in 2016

Bristol-Myers Squibb’s (BMY) Opdivo is expected to witness a slowdown in demand in the second-line lung cancer segment due to FDA approval of Merck’s (MRK) Keytruda in first-line and second-line lung cancer indications. Further, Opdivo may also face competition from Roche’s (RHHBY) Tecentriq in second-line lung cancer segment as well as from AstraZeneca’s (AZN) investigational oncology drug.

The chart above shows the revenue growth trend for Opdivo. Despite intense competitive pressures, Opdivo is expected to report strong revenue growth for fiscal 2016. This is attributed to robust performance in international markets as well as the drug’s development for several other indications.

Bristol-Myers Squibb has also been actively involved in demonstrating the efficacy of Opdivo-Yervoy combination therapy in multiple tumors.

If these trends result in solid revenue growth for Opdivo, it may have a positive impact on Bristol-Myers Squibb stock, as well as the Vanguard Growth ETF (VUG). Bristol-Myers Squibb makes up about 1.1% of VUG’s total portfolio holdings.

In 3Q16, Bristol-Myers Squibb (BMY) secured reimbursement for Opdivo in Sweden and Denmark. After its commercial launch, Opdivo also witnessed solid uptake in France and Germany. The drug currently accounts for ~70%–80% of the PD-L1 checkpoint inhibitor market share in these markets.

Revenues earned from France and Germany in 3Q16 have yet to be recognized in Bristol-Myers Squibb’s income statement. This is due to pending reimbursement-related discussions with the regulatory authorities in these respective markets. The final price of Opdivo in these international markets is expected to be set by the end of 2016.