Bristol-Myers Squibb lost a whole lot of market share going into the weekend.
Photo by Eric Thayer—Bloomberg via Getty Images
By Sy Mukherjee
August 5, 2016

Bristol-Myers Squibb (bmy) shed about 16% of its market value Friday after a clinical trial failure for one of its major cancer drugs sent investors fleeing. And rival Merck (mrk), which has a similar competing drug on the market, is the main beneficiary.

Bristol-Myers’ cancer immunotherapy treatment Opdivo is a recent shining star in the company’s portfolio and has generally been trouncing Merck’s rival therapy Keytruda in sales. A big part of what’s driving Opdivo’s success is an early decision by BMS to chase a much wider share of the cancer patient population—a decision that has meant that doctors don’t have to administer a time-consuming diagnostic test to check if patients have a protein called PD-L1 before prescribing Opdivo in certain cancers.

Physicians who want to prescribe Keytruda, on the other hand, must test for that protein since Merck’s clinical trials of the drug focused on people with PD-L1 (and is more effective for those patients). That led to an earlier Food and Drug Administration (FDA) approval for Keytruda than Opdivo in 2014 since the former was a more targeted therapy; but it also left Merck with a smaller slice of the market.

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Friday’s developments highlight the flip-side of BMS’ strategy, and may have thrown a wrench into its success. The company has been trying to win FDA approval for Opdivo to be used as a first option treatment for non-small cell lung cancer (NSCLC). But a late-stage clinical trial called CheckMate-026 for the drug failed to meet its primary goal of halting cancer progression in advanced, untreated patients whose tumors consisted of at least 5% PD-L1.

Bristol-Myers emphasized Opdivo’s other successes and ongoing studies evaluating its effectiveness in combination with the company’s other cancer drugs.

“Opdivo has become a foundational treatment that is transforming cancer care across multiple tumor types,” chief executive Giovanni Caforio said in a statement.

“While we are disappointed CheckMate-026 did not meet its primary endpoint in this broad patient population, we remain committed to improving patient outcomes through our comprehensive development program, including the ongoing Phase III CheckMate-227 study exploring the potential of the combination of Opdivo plus [our other cancer immunotherapy] Yervoy for PD-L1 positive patients, and Opdivo plus Yervoy, or Opdivo plus chemotherapy in PD-L1 negative patients,” he added.

Merck, on the other hand, gained more than 10% on Friday. That’s not just because of Opdivo’s failure—last month, Keytruda was shown to be better than standard chemotherapy in untreated advanced lung cancer patients with high levels of the PD-L1 protein, both stopping cancer progression and extending patients’ lives. That means Keytruda could become the go-to option in the disease.

Both Opdivo and Keytruda have been cleared by the FDA to treat multiple types of cancer, including melanoma and lung cancer. They are being tested in dozens of other tumor types as well, so the competition will only get hotter.

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