Bristol Myers' new cancer partnership is promising, but doesn't change our stance on the stock yet

CNBC

4 days ago

Bristol Myers Squibb on Monday made a splashy move to fortify its drug pipeline. However, the subdued stock reaction suggests Wall Street is looking for more show than tell. So are we. The news The drugmaker announced a licensing deal with Germany's BioNTech to jointly develop and commercialize the latter's experimental cancer therapy known as BNT327. The drug, which is still in clinical trials, belongs to an increasingly popular group of treatments called immuno-oncology. Often called IO for short, these treatments work by getting a patient's own immune system to help fight the cancer. Merck 's Keytruda is the best-known drug in the class, but Club name Bristol Myers' own Opdivo is there, too. Within the field of IO, there's a lot of buzz around the newer dual-acting approach that BNT327 – and similar drugs being investigated by other companies – use to treat the disease. Bristol Myer's agreement with BioNTech is potentially worth around $11 billion to the German drugmaker if certain milestones are achieved in the coming years. Bristol Myers is paying $1.5 billion upfront and owes another $2 billion in payments through 2028. Profits and losses from the drug will be shared equally between the two companies, according to a Bristol Myers press release. BioNTech is best known for its work on a Covid-19 vaccine in collaboration with Pfizer . Big picture For investors, Bristol Myers entered the year with a lot to prove, as the company navigates the loss of exclusivity for cancer drug Revlimid and nears the same fate for top-selling drugs such as bloodthiner Eliquis, and the aforementioned Opdivo in the coming years. The burden of proof got even higher in April following a failed trial for its new schizophrenia treatment Cobenfy, which investors — including the Club — have viewed as critical to the company's future revenue growth. While CEO Chris Boerner has argued that the trial results do not "really have any impact on the long-term potential" of Cobenfy, the market is divided. Speaking on CNBC on Monday, Boerner said the company's partnership with BioNTech gives the company "another leg for growth as we exit this decade." Boerner said he believes the two companies have an opportunity to "transform the outcomes for patients" in hard-to-treat solid tumors, including lung and triple-negative breast cancer. "We think this could be the next new frontier in the treatment of cancer," said Boerner, who added that Bristol Myers' experience in IO drugs with Opdivo is helpful in pursuing the BNT327 opportunity. BMY YTD mountain Bristol Myers' year-to-date stock performance. The long-term sales potential of Cobenfy isn't the only question mark that has lately weighed on shares of Bristol Myers, which are down around 18% over the past three months. Bristol Myers and its peers are also facing incoming tariff hurdles from President Donald Trump . Though the Trump administration has not formally announced tariffs on pharmaceuticals, the president has said they are being considered. Trump also signed an executive order in May to incentivize domestic manufacturing for prescription drugs. Bristol Myers already pledged a $40 billion investment in the U.S. last month. Asked about these other political dynamics Monday, Boerner said that the company is "engaging with the president and his administration on tariffs," noting that the majority of its infrastructure and sales are U.S.-based. "We need to make sure they understand the complexity of the supply chain so any tariffs that are implemented are implemented in a way that we don't see supply disruptions," the CEO said, further stating that this is a priority to ensure patients get their medicine. He also added that it would take time to shift supply chains. Bottom line Bristol Myers' deal with BioNTech is promising – and given the importance of filling out its drug pipeline with additional candidates to drive growth and assuage investor concerns about the patent cliff, Jim Cramer said he would have expected to see a more positive market reaction Monday. In afternoon trading, the stock gained less than 1% to just over $48 per share. BioNTech shares surged more than 19%, though. Jim called that disparity "a very one-way street." The hope, Jim explained, is that BNT327 could be competitive with Merck's Keytruda, if not even more effective. Nevertheless, we understand that investors have a higher bar for Bristol Myers these days in the wake of the Cobenfy trial in April. "It's turned into a show-me story," said Jeff Marks, director of portfolio analysis for the Club. Indeed, we sold 100 shares of Bristol Myers back in March when the stock was above $60 a share, but have held off on rebuilding it at these lower price levels for that reason. We lowered our price target on the stock to $60 a share from $70 following earnings in April to account for the new Cobenfy information. (Jim Cramer's Charitable Trust is long BMY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.