BMY: The best positioned company in NSCLC

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Richard Evans / Scott Hinds / Ryan Baum / Hardy Evans

203.901.1631 /.1632 / .1627

revans@ / shinds@ /


August 17, 2016

BMY: The best positioned company in NSCLC

  • MRK’s success with Keytruda as monotherapy in 1st-line NSCLC patients with PDL1 expression levels ≥50% is likely to give MRK an exclusive hold on this one-quarter of NSCLC demand in the near-term
  • The remaining three-quarters of 1st-line NSCLC patients still are likely to be treated with platinum-base chemotherapy only; most eventually will need 2nd-line treatment – as PD1 naïve patients with PDL1’s below 50% – where Opdivo remains the standard of care
  • Keytruda is unlikely to remain the 1st-line standard in PDL1≥50% NSCLC as a single agent. PD1’s in combination with either platinum-based chemo or a CTLA4 inhibitor have shown greater 1st-line NSCLC efficacy than PD1’s as monotherapy; as these PD1 combinations progress through trials, they are likely to displace Keytruda monotherapy as the PDL1≥50% 1st-line standard. Key questions are what’s best to add to a PD1, and which PD1 is best positioned in the race to establish a PD1 combination standard
  • The available evidence is limited to relatively small patient groups in phase 1 & 2 trials – but it is nonetheless the best available evidence. Objective response rates (ORR’s) with Opdivo (PD1) + Yervoy (CTLA4) are the highest reported in patients with PDL1≥50% expression levels (92%, 12/13), and stand well above the 50% ORR (95%, confidence interval 79%-89%) shown by Keytruda in combination with platinum-based chemotherapy in patients above the same PDL1≥50% expression threshold
  • Below this threshold PD1+CTLA4 and PD1+platinum-based chemo appear to be on more equal footing, indicating PDL1(-) and perhaps also weakly positive PDL1 patients will be treated with a PD1+platinum, and patients with moderate and higher PDL1 expression are likely to be treated with a PD1+CTLA4 combination – though it’s entirely unclear where the PDL1 cut-off would fall
  • Among the CTLA4 alternatives, BMY’s Opdivo/Yervoy has shown higher NSCLC ORR’s than AZN’s durvalumab/tremelimumab, and MRK’s Keytruda is only in preliminary (phase 1/phase 2, 2nd-line) testing – in combination with BMY’s Yervoy. As such we see BMY’s Opdivo/Yervoy as the most likely standard for 1st-line NSCLC in patients with PDL1≥50% expression levels
  • MRK, BMY, and Roche all are testing Keytruda, Opdivo, and Tecentriq in combination with platinum-based chemo as 1st-line treatment, with no clear leader evident. AZN’s durvalumab is not being evaluated in combination with platinum-based chemo for 1st-line NSCLC. PFE/MKGAY’s avelumab is being evaluated only as monotherapy for 1st-line NSCLC; as of now there are no 1st-line studies in combination with either a CTLA4 or platinum-based chemo
  • BMY is the only PD1 competitor with significant late-stage development activity behind both PD1/CTLA4 and PD1/platinum-based chemo standards. BMY has a clear apparent lead in the PD1/CTLA4 race with Opdivo/Yervoy, and is competitive with both MRK and Roche in the race to a PD1/platinum-based chemo standard

Where we’re BULLISH: Biopharma companies with undervalued pipelines (e.g. BMY, GILD, SHPG, SNY, VRTX); Biopharma companies with pending major product approvals (e.g. ACAD, ADMA, ALIOF, BIIB, CHMA, CLVS, CPRX, CTIC, GILD, ICPT, JAZZ, LLY, LPCN, MRK, NVO, OCUL, PTCT, SRPT, TEVA, ZSPH); SNY on sales potential for Praluent (alirocumab); CNC, MOH and WCG on bullish prospects for Medicaid HMOs; and, DVA and FMS for the likely gross margin effects of generic forms of Epogen

Where we’re BEARISH: PBMs facing loss of generic dispensing margin as the AWP pricing benchmark is replaced (e.g. ESRX); Drug Retail as dispensing margins are pressured by narrowing retail networks and replacement of AWP (e.g. WBA, CVS); ABBV on Humira US pricing risks; ENDP on risks to branded Rx price premia; Research Tools & Services companies as growth expectations and valuations are too high in an environment of falling biopharma R&D spend (e.g. CRL, Q, ICLR); and, suppliers of capital equipment to hospitals on the likelihood hospitals over-invested in capital equipment before the roll-out of the Affordable Care Act (e.g. ISRG, EKTAY, HAE)

Having beaten the platinum-based standard of care (SOC) in NSCLC patients with PDL1 expression levels of 50% or greater, Keytruda (MRK) should exclusively claim this portion (25% of total patients) of the NSCLC market – at least temporarily

The remaining 75% of NSCLC patients should continue to be treated 1st-line with the platinum-based SOC only – i.e. without Keytruda or any other inhibitor of PD1. Eventually most of these PD1-inhibitor-naïve, PDL1<50% expression level patients will need 2nd-line therapy, where Opdivo (BMY) remains the SOC

Key questions are whether Keytruda can defend its 1st-line status above the PDL1≥50% threshold, and/or expand its 1st-line labeling to NSCLC patients with lower PDL1 expression levels. Keytruda’s hold on 1st-line PDL1≥50% patients is as monotherapy, raising the matter of whether any PD1-based combination regimen(s) is(are) likely to be superior to Keytruda as monotherapy; and if so, which regimen(s)

Available evidence implies that PD1-based combination regimens likely will prove superior to PD1-based monotherapy as 1st-line NSCLC treatment. As monotherapy in Keynote-001 Keytruda showed a 19.4% ORR[1] across all PDL1 expression levels, and a 45.2% ORR in patients with PDL1≥50% expression. Likewise, as monotherapy in Checkmate-012, Opdivo showed a 23% ORR across all PDL1 expression levels, and a 50% ORR in patients with PDL1≥50% expression (Exhibit 1, three columns at left)

ORR’s registered in 1st-line PD1 combination studies are higher than those seen with PD1 monotherapy, thus our belief that PD1-based combinations will supersede PD1 monotherapy. In Keynote-021 Keytruda + platinum-based SOC showed a 57% ORR overall that did not vary significantly by PDL1 expression level (Exhibit 2, three columns at right); however, the ORR did trend higher in nonsquamous patients treated with a combination of Keytruda + carboplatin and pemetrexed (‘cohort C’, middle column). Opdivo in combination with the platinum-based SOC also reported ORR’s higher than either Keytruda or Opdivo as monotherapy, also with no evidence that treatment effect significantly varied by PDL1 expression level (ORR 43% for PDL1<1%; 48% for PDL1≥1%; Exhibit 1 again, middle two columns, ORR for PDL1≥50% not reported). Notably Opdivo in combination with Yervoy (BMY’s CTLA4 inhibitor) delivered an ORR of 92% in 12 of 13 patients with PDL1≥50%; and, ORR’s were plainly influenced by PDL1 expression levels for patients treated with the Opdivo/Yervoy combination (Exhibit 1 again, three columns at right)

Despite the genuine limitations of relatively small patient numbers and the proven risks of extrapolating from these, we nevertheless point out that the preceding data points are the best available evidence, and that it pays to be clear on what they imply about future PD1-based standards for NSCLC. If these results are indicative of what will be seen in phase 3, we would expect PD1/CTLA4 combinations to displace Keytruda as the 1st-line NSCLC SOC for PDL1≥50% patients, and believe the PD1/CTLA4 combination might reasonably be expected to become 1st-line SOC at even lower PDL1 expression levels. For PDL1(-) patients and/or patients with very low PDL1 expression levels, we believe PD1’s in combination with platinum-based chemotherapy are the likely 1st-line NSCLC standard

We believe Opdivo/Yervoy is likely to be the PD1/CTLA4 combination that displaces Keytruda from 1st-line NSCLC status. AZN is developing the only other PD1/CTLA4 combination in 1st-line NSCLC (durvalumab/tremelimumab); however early results are less positive for this combination than for Opdivo/Yervoy (Exhibit 3, note this study includes both 1st– and 2nd-line NSCLC subjects). MRK is evaluating Keytruda in combination with Yervoy (NCT02039674); however, this is a phase 1/phase 2 trial in 2nd-line NSCLC

Competition for the PD1+platinum 1st-line role is far more intense. With the exception of its single +Yervoy phase 1/phase 2 2nd-line study, MRK’s PD1+ NSCLC strategy is entirely focused on Keytruda+platinum-based chemotherapy (Exhibit 4). Similarly, Roche’s 1st-line NSCLC strategy for Tecentriq is (except for IMpower 110/111 and the phase 2 ‘FIR’ trial) entirely focused on Tecentriq in combination with platinum-based chemotherapy (Exhibit 5)

By comparison BMY’s 1st-line NSCLC program for Opdivo includes both +CTLA4 (Yervoy) and +platinum-based chemo protocols (Exhibit 6)

Conversely AZN’s 1st-line NSCLC program for durvalumab is based entirely on a +CTLA4 (tremelimumab) approach, with no major trials in which durvalumab is evaluated in combination with platinum-based chemotherapy (Exhibit 7)

Finally, PFE/MKGAY’s avelumab 1st-line NSCLC strategy is centered on avelumab as monotherapy – an apparently untenable approach given strong evidence that +CTLA4 and/or +platinum-based chemo strategies likely will prevail as 1st-line (Exhibit 8)

Exhibit 9 provides a timeline of PD1-based 1st-line NSCLC studies by primary completion date[2]


  1. ORR: Objective Response Rate
  2. As posted by trial sponsors on


©2016, SSR, LLC, 1055 Washington Blvd, Stamford, CT 06901. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The views and other information provided are subject to change without notice. This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. In the past 12 months, through a wholly-owned subsidiary SSR Health LLC has provided paid advisory services to Pfizer Inc (PFE) and to Merck (MKGAY) on both securities-related and non-securities-related topics

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