Since last Friday, Bristol-Myers Squibb (NYSE:BMY) has dropped nearly 19% after reporting that Opdivo failed to meet its primary endpoint of progression-free survival in patients with previously untreated advanced non-small cell lung cancer (NSCLC) whose tumors expressed PD-L1 at ? 5% (Checkmate-026). Although the detailed results are not yet available, the headlines were enough to spook investors into a massive selloff bringing Bristol-Myers down to the 18 month resistance level of $58-$60 last seen during the January 2016 crash and the flash crash of August 2015 ( Figure 1). Credit Suisse and other have downgraded the stock to neutral and lowered their share projections to the low $60's. In contrast, Merck (NYSE:MRK) reported positive results for Keytruda in NSCLC in June 2016 ( Keynote-024) and shares have rallied to new 52 week highs. Opdivo's failed trial coupled with Merck's positive results in the same indication acted as a catalyst to drive BMS down further while boosting Merck's share price north of $60. A detailed analysis and strategy will be discussed below.
Figure 1: Bristol-Myer's Squibb May 2015-Present
