Bristol-Myers: Acquisition of Mirati Adds Promising Cancer Drug at a Fair Price

We’re not making significant changes to our $66 Bristol fair value estimate or wide moat rating following the announced $4.8 billion acquisition of cancer-focused biotech Mirati. We believe Mirati’s KRAS G12C inhibitor Krazati is the main driver of the deal. The drug gained approval in second-line non-small cell lung cancer, or NSCLC, in late 2022. While Krazati was the second approved drug in its class (behind Amgen’s Lumakras), we think Krazati’s safety profile and data so far in combination with PD-1 antibodies looks promising (Keytruda combination moving to phase 3 this year) especially since Lumakras has shown safety issues preventing a similar combination from moving forward. Krazati’s position in the market could also improve if confirmatory data from a trial in second-line lung cancer is positive in the first-half of 2024, as an FDA advisory committee gave a poor review of Lumakras’ confirmatory study in this indication last week.