Monday, January 27, 2014

Morgan Stanley Moves Merck's 12 Month Target Up to $60; Rates "Overweight" -- Was "Underweight"

More of the -- I believe -- largely ill-considered reliance here. . . on some sort of bad event, allegedly brewing, at BMS -- and its nivolumab program. David Risinger, writing for Morgan Stanley (apparently believing that something bad, at BMS, is a one-for-one positive, for Merck) does cite one or two other catalysts, to be sure -- to explain the morning's nearly-diametric change in sentiment here.

But the crux of it is that he thinks the bulk of the perhaps $12 to $14 billion a year in peak annual sales (come 2018 to 2020) for a robustly effective anti-PD-1 oncology candidate -- across a wide array of cancers -- might go to Merck.

I don't see it that way -- and more directly, he is virtually alone in this view, on Wall Street. Most others still see the vast bulk of that anti-PD-1 candidate money flowing to Bristol Myers Squibb, and nivolumab. Remember that the most likely combo therapy arena is a franchise BMS controls. Remember also that it could take Merck a year or two to get its data to a point where FDA is comfortable approving MK-3475 for anything other than a melanoma indication. BMS is much further down the path to having good data in several other cancers.

Either (or both) could yet flame out -- but I'd be surprised if the temporary weakness in BMS's stock price lasts beyond the current swoon. BMS has just always been very conservative -- about making concrete drug candidate predictions -- at this stage. So their stock suffers a bit. So it goes.

Candidly, given what I know about Mr. Risinger, I will also be surprised if David is right -- and everyone else is wrong.

But I guess it could all shake out that way -- everything could align perfectly -- for Whitehouse Station. It is my experience that these are never one-for-one tradeoffs. And we will learn so much more at ASCO in late May. . . that (I think) will be the time to make bigger bets -- based on actual data. Not some "maybe. . . ifs". That's my $0.03 (with inflation!).


Anonymous said...

Interesting. But, what would happen if Merck and BMS sat down and negogiated an agreement that allows 'shared' combo therapy? Something along the lines Roche and S/P did with the interferon/ribivarin paradigm.

Condor said...

Thanks for stopping in, Anon. --

That is interesting, right? If I am right, that BMS has the clear lead, here -- there would be little motivation to peel off any part of the franchise -- for Merck.

If Merck does gain a clear lead, then BMS will likely "share" Yervoy, as the anchor therapy in lung cancer, with Whitehouse Station.

But right now, BMS has no need (and scant desire) to do so.

Just my guess. Great exchanging ideas here. . . and, of course, oncologists can write any combo they like -- even go off label -- but there may not be reimbursement at the insurers-, or the exchanges-, or Medicare/Medicaid windows for than "experimental" deployment.

We shall see. Excellent comment --Do stop back!