Bristol Myers Says CVR Expires Due To Pending FDA Approval; Street Sees 20% Upside

Bristol Myers Squibb on Jan. 1 updated investors on the drugmaker’s recent actions taken regarding the US Food and Drug Administration’s (FDA) pending review of its Biologics License Application (BLA) for lisocabtagene maraleucel (liso-cel). The treatment is used in adults with relapsed or refractory (R/R) large B-cell lymphoma after at least two prior therapies.

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The biopharmaceutical company said that its viral vector third-party manufacturing plant was inspected between Dec. 3, 2020 and Dec. 10, 2020. In addition, Brystol Myers (BMY) reported that it took action within 8 days following the inspection regarding the observations received for the Lonza facility in Texas. The company also responded to the information requests with no outstanding requests at present.

The FDA decision is still pending and is yet to provide a new action date for the application. The company first submitted the BLA on Dec. 18, 2019. On Nov. 16, 2020, the FDA had informed Bristol Myers that they would not be able to complete the review by the action date of Nov. 16, 2020. The FDA was unable to conduct an inspection of a third-party manufacturing facility in Texas due to travel restrictions related to the COVID-19 pandemic.

Furthermore, one of the three required milestones for payment of the Bristol Myers Squibb Contingent Value Right (CVR) remained unaccomplished due to the pending FDA approval as of Dec. 31, 2020. This led to the automatic termination of the CVR agreement Jan. 1,2021 rendering the CVRs as ineligible for payment under the agreement.

Bristol Myers on Nov. 20, 2019 disclosed that Celegene became a subsidiary upon its acquisition. The Celgene shareholders received one tradable CVR entitling them to an earnout payment of $9 in cash upon the accomplishment of future regulatory milestones in addition to 1 share of Bristol Myers common stock, and $50 in cash for each share of Bristol Myers.

On Dec. 15, Goldman Sachs analyst Terence Flynn raised the price target on the stock to $86 (39% upside potential) from $82 and reiterated a Buy rating.

The rating was backed by expectations regarding the company’s commercial performance, FDA approvals and pipeline data leading to upward estimate revisions and multiple development.

Flynn expects a re-rating of the shares and projects revenue to generate $13 billion in 2025 from recent launches and pipeline assets. (See BMY stock analysis on TipRanks)

Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys and 4 Holds. The average price target stands at $74.36 and implies a close to 20% upside potential to current levels.