Bristol-Myers Squibb

Goldman Sachs Sees Upside for Bristol-Myers Squibb in 2018; ‘CheckMate-227’ Trial Key ‘Catalyst’

12:31 PM, Jan 5, 2018 — Goldman Sachs (GS) has issued a buy rating on Bristol-Myers Squibb (BMY), saying that it sees upside for the pharmaceutical stock this year which will be affected by the strength of data from the company’s so-called Checkmate-227 (CM-227) trial.

The brokerage firm said that it continues to see approximately 14%-to-31% upside to Bristol-Myers Squibb’s stock depending on the strength of the data from the CM-227 trial in both its bull and uber bull cases, according to a note published on Friday. But the firm was also clear to point out that the outcome of the CM-227 trial would not be the only factor in the likely trajectory of the drug company’s share price over the coming months.

With a 12-month price target of $72 for Bristol-Myers Squibb, Goldman Sachs said that it sees key risks as clinical data readout, competition and commercial execution. It expects Bristol-Myers Squibb to generate $20.6 bn in revenues and $3.23 in earnings per share for 2018.The firm said that if the CM-227 trial fails, it believes the Bristol-Myers Squibb stock could go to a base value of approximately $55.

“While a negative outcome would be clearly disappointing, we don’t believe the BMY [Bristol-Myers-Squibb] story is pinned to this outcome alone with optionality in 1L NSCLC [Non-Small Cell Lung Cancer] through monotherapy, chemo combo and other trials like CM-9LA expected in 2019”.

It went on to say that Bristol-Myers Squibb would continue to have one of the most dominant immuno-oncology assets in ‘Opdivo’, a drug used to treat patients with certain forms of colorectal cancer which secured accelerated approval from the Food and Drug Administration in July 2017.

With “a very broad and promising next gen IO [immuno-oncology] portfolio” likely making it an attractive candidate for mergers and acquisitions, Goldman Sachs said that in a mergers and acquisitions scenario, it believes the stock could be worth approximately “$59-to-$74 ex-1L NSCLC”.

“While we believe the longer term BMY story is not limited to this trial, it is clearly the most important catalyst for the stock this year,” the Goldman Sachs note said. “Having said that, even if CM-227 fails (in the IO-IO arm), we believe BMY remains an attractive asset given its still dominant position in IO with Opdivo and Yervoy making them an attractive M&A candidate as well.”

“Our options analysts recommend buying BMY March Calls and MRK[Merck] March straddles ahead of CM-227 interim data,” the note said.

Price: 253.93 Price Change: -2.90 Percent Change: -1.13

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