Shares of AstraZeneca (AZN) are dropping sharply after the company said its MYSTIC trial failed to show its two-drug combination extended progression-free survival compared with standard-of-care chemotherapy for lung cancer patients. Leerink analyst Seamus Fernandez downgraded the stock to Market Perform following the news, while noting that this could have a negative read-through for Bristol-Myers (BMY), which is testing a similar combination.
MYSTIC TRIAL: AstraZeneca has announced progression-free survival, or PFS, results for the Phase III MYSTIC trial, which is testing Imfinzi monotherapy or Imfinzi in combination with tremelimumab versus platinum-based standard-of-care chemotherapy in previously-untreated patients with metastatic first line non-small cell lung cancer. The combination did not meet the primary endpoint of improving PFS compared to standard-of-care in patients whose tumors express PD-L1 on 25% or more of their cancer cells.
MOVING TO THE SIDELINES: Following the news, Leerink’s Fernandez downgraded AstraZeneca to Market Perform from Outperform and lowered his price target on the shares to $31 from $36, citing the company’s “continued reliance on externalization profits and deteriorating earnings quality.” The analyst also pointed out that he is surprised that AstraZeneca did not have a major cost restructuring plan in place following the MYSTIC trial failure. Further, selling off 50% of the Lynparza opportunity raises near-term concerns about the sustainability of the company’s cash flow, Fernandez contended.
READ-THROUGH FOR BRISTOL-MYERS: Leerink’s Fernandez argued in a separate note that the MYSTIC trial failure is an obvious negative read-through for Bristol-Myers’ combo of Opdivo + Yervoy in the ongoing CheckMate-227 trial. He pointed out that while there are several key differences in trial design between MYSTIC and CM-227, they are unlikely to result in meaningfully different outcomes. Also commenting on AstraZeneca’s news, Goldman analyst Jami Rubin said Bristol-Myers could test the $50 level. Confidence gets hit for Bristol’s PD-L1+CTLA4 thesis in first line non-small cell lung cancer and for its own registration phase 3 trial, CM-227, with a potential interim readout not expected till later in the year, he added. The analyst told investors that he does not have any contribution from first line non-small cell lung cancer in his estimates, while noting that Bristol’s assets and trial are very different from MYSTIC.
