Shares of Bristol-Myers Squibb (BMY) are on the rise after competitor Merck (MRK) announced it is withdrawing its European application for a combination regimen featuring Keytruda, the company’s cancer immunotherapy drug. Following the news, SunTrust analyst John Boris upgraded the former’s stock to Buy as he believes Merck’s KN-189 data delay and withdrawal of its European application for Keytruda improves Bristol-Myers’ competitive position. Meanwhile, several Wall Street analysts downgraded Merck to hold-equivalent ratings.

EUROPEAN WITHDRAWAL: Merck has announced that it has withdrawn its European application for Keytruda in combination with pemetrexed and carboplatin as a first-line treatment for metastatic nonsquamous non-small cell lung cancer. The application was based on findings from KEYNOTE-021, Cohort G. Merck said it is confident in the clinical data from this “rigorously conducted trial,” which demonstrated significant improvements in overall response rate and progression-free survival for the Keytruda combination regimen compared to chemotherapy alone.

BUY BRISTOL-MYERS: In a research note to investors this morning, SunTrust’s Boris upgraded Bristol-Myers to Buy from Hold and raised his price target on the shares to $75 from $55, saying Merck’s KN-189 data delay to 2019 and withdrawal of its EU first-line NSCLC filing improves Bristol’s competitive position. Boris noted he models an additional $2B in 2021 revenue as a result, adding that he has increased confidence in the Opdivo + Yervoy arm of the Checkmate-227 trial expected in 2018 to generate overall survival benefits. Additionally, the analyst told investors that he views Bristol-Myers as an attractive strategic asset that could make sense to get a potential bid from Pfizer (PFE). However, such a scenario depends on macro factors such as tax reform and/or repatriation and “binary events” in the marketplace, including the read-out from the company’s 227 trial.

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