Bristol-Myers Cut To Sell With Pfizer Takeover Seen As Unlikely

The shares of Bristol-Myers (BMY) are falling after BMO Capital downgraded the drugmaker's stock to Underperform, the firm's equivalent of a sell rating, partly due to Pfizer's (PFE) CEO Ian Read having indicated yesterday that his company would not look to make a major acquisition in the near-term. In recent months there has been speculation that Pfizer would look to acquire Bristol-Myers.

PFIZER COMMENTS: Although Pfizer can "do a large deal" if a transaction makes sense, "certain large companies have significant, almost binary risks ... which could immediately alter their values," so Pfizer will not rush into deals, Read stated on the company's first quarter results conference call yesterday. After Bristol-Myers' Opdivo drug failed to meet the endpoints of a trial in non-small cell lung cancer last year, the company does pose such risks, according to pharma news website FiercePharma.

CUT TO SELL: BMO Capital analyst Alex Arfaei cut his rating on Bristol-Myers to Underperform from Market Perform. The analyst noted that he had previously written that the odds of the company being acquired are "reasonably low," partly due to "uncertainty" about its immuno-oncology franchise, including Opdivo. Read's comments echo those concerns, according to Arfaei. Moteover, later this year a number of events, including positive data for Merck's (MRK) immuno-oncology drug, Keytruda, will probably further cloud the future of Bristol Myers' IO portfolio, according to Arfaei. Uncertainty about ongoing tax reform initiatives in Washington also make an acquisition of Bristol Myers less likely, the analyst stated.

PRICE ACTION: In morning trading, Bristol-Myers dropped 1.5% to $55.09 and Pfizer slid 0.6% to $33.42.