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Why These Two Pharma Stocks Are Having Drastically Different Days

Trading On The Floor Of The NYSE As U.S. Stocks Decline With Banks, Health Shares LowerTrading On The Floor Of The NYSE As U.S. Stocks Decline With Banks, Health Shares Lower
A 10% slide for Bristol-Myers on FridayPhotograph by Michael Nagle—Bloomberg via Getty Images

Bristol-Myers Squibb (BMY) had an ugly start to the weekend, much to the benefit of rival Merck (MRK). Shares of the pharma giant tanked as much as 11% during early afternoon trading – a loss of about $10 billion in market cap – while Merck gained 3.5%.

The reason for the slump centers on the two drug makers’ competing cancer therapies: Bristol-Myers’ Opdivo and Merck’s Keytruda. As I’ve previously explained, these treatments are part of a new class of cancer immunotherapy medicines known as “checkpoint inhibitors.” BMS and Merck were the first companies to win approval of these kinds of novel drugs (which use the body’s immune system to fight tumors), followed by Roche, and AstraZeneca (AZN) and Pfizer (PFE) are developing their own experimental candidates in the space.

Opdivo and Keytruda are both being tested in a wide array of cancers. But one critically contested arena is lung cancer. And on that front, Bristol-Myers unveiled some news Thursday evening that nearly assures Keytruda’s dominance in the near term.

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BMS abruptly announced that it’s ditching an accelerated approval application to the FDA for a combo of Opdivo and an older Bristol-Myers drug called Yervoy. The company was hoping that this combination could become a “first-line” option for lung cancer patients, meaning it could be prescribed as the very first treatment cocktail for a patient rather than a secondary backup.

With that accelerated approval no longer in the cards, it could be years before another checkpoint inhibitor is approved for first-line treatment of lung cancer. Meanwhile, Merck recently filed a surprisingly early application for first-line approval of a Keytruda/chemotherapy combination to treat the disease. Clinical trial data has previously shown Keytruda to be more effective than standard chemotherapy in lung cancer.

The numbers reveal just why the lung cancer market is so critical: the disease makes up more than 13% of all new cancers and nearly 27% of all cancer deaths in the U.S. And just 17.7% of diagnosed patients are still alive five years out from their diagnosis, potentially opening up billions in sales for Merck in a field void of competitors.