Zacks_Analysts' Blog : European Clearance for BMY Drug - Analyst Blog

Recently, Bristol-Myers Squibb Company (BMY) received a boost with the European Commission (EC) approving Baraclude (entecavir) for an additional indication.

The current approval by the European regulatory authorities allows Bristol-Myers to market Baraclude in 27 nations of the European Union for treating adults suffering from chronic hepatitis B (CHB) with decompensated liver disease. The US clearance for Baraclude for the same indication came in October 2010.

Decompensated liver disease leads to improper functioning of the liver due to severe scarring of the organ and often needing liver transplantation. Approximately, 350 million people are infected by the CHB virus across the globe.

The European approval for the additional indication was based on encouraging safety and efficacy data from a randomised, open-label, multi-centre study (ETV-048) study. Data from the study revealed that Bristol-Myers’ therapy showed greater viral suppression compared to Gilead’s (GILD) adefovir at 24 and 48 weeks following the commencement of treatment.

We remind investors that Baraclude was initially approved by the EC in 2006 for treating CHB infected adults suffering from compensated liver disease and evidence of active viral replication, continuous high levels of serum alanine aminotransferase and histological evidence of active inflammation and/or fibrosis. We believe that the approval of Baraclude for the additional indication will further boost the top line at Bristol-Myers.

Our Take & Recommendation

Bristol-Myers currently carries a Zacks #4 Rank (short-term Sell rating). Our biggest concern for the company is the high exposure to generic risk on many of its leading franchises. The loss of exclusivity of key drugs including the blockbuster Plavix will result in significant loss of revenues for Bristol-Myers.

However, we are Neutral on Bristol-Myers in the long-term. The more stable long-term outlook is based on measures taken by Bristol-Myers like the extension of the Abilify agreement with Otsuka, the acquisition of ZymoGenetics and Medarex to combat the looming threat of generics.  Moreover, the company intends to launch new products to compensate for the loss of revenues due to the genericization of key drugs at Bristol-Myers.