Editors Note:

We had entries triggered on two watch list stocks. Nvidia and Jack in the Box both saw their upside entry points hit and both moved to the active portfolio. BMY is very close to triggering an upside entry at $57.50.

I am not adding any new Watch list candidates this week. The S&P futures are down -5 and the Monday night debate could cause some significant market volatility.


New Watch List Entry:


      No New Watch List Entries


Stocks Dropped from Watch List:


      No Watch List Drops


Active Watch List Play Descriptions:


BMY - Bristol-Myers Squib - Company Profile

Comments:

BMY shares held at $55 all week and could be preparing for a rebound.


Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers chemically-synthesized drugs or small molecule, and biologic in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV); oncology; immunoscience; cardiovascular; and neuroscience. Its products include Baraclude for the treatment of chronic hepatitis B virus infection; Daklinza and Sunvepra for the treatment of hepatitis C virus infection; Reyataz and Sustiva for the treatment of HIV; Empliciti, a humanized monoclonal antibody for the treatment of multiple myeloma; Erbitux, an IgG1 monoclonal antibody that targets and blocks the epidermal growth factor receptor; Opdivo, a fully human monoclonal antibody for non-small cell lung cancer, renal cell cancer, and melanoma; Sprycel, a multi-targeted tyrosine kinase inhibitor for the treatment of adults with Philadelphia chromosome-positive chronic myeloid leukemia; Yervoy, a monoclonal antibody for the treatment of patients with metastatic melanoma; Abilify, an antipsychotic agent for adult patients with schizophrenia, bipolar mania disorder, and major depressive disorder; Orencia to treat rheumatoid arthritis; and Eliquis, an oral factor Xa inhibitor targeted at stroke prevention in atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders. Its products pipeline includes Beclabuvir, a non-nucleoside NS5B inhibitor that is in regulatory review for the treatment of HCV; BMS-663068, an investigational compound that is being studied in HIV-1; and Prostvac, a Phase III prostate-specific antigen to treat asymptomatic or minimally symptomatic metastatic castration-resistant prostate cancer.

BMY is NOT a one-drug company. On August 5th, the stock fell from $75 to $62 on news a clinical trial on Opdivo for lung cancer without chemotherapy had ended without the desired results. More than $20 billion in market cap was erased from the stock because of one trial on a drug that is already successful in lung cancer with chemotherapy and in treating renal cell cancer.

This was not a case where all the patients in the trial died. It was simply a trial that did not work. Specifically this particular trial was hoping to prove the drug would be successful in patients with more than 5% of the PD-L1 protein in the tumors and had not received chemotherapy. This is a very broad trial. They hoped to be able to avoid the expensive chemotherapy process and the very painful side effects. It did not work in that application BUT it has already been approved for use with chemotherapy. The competitor drug from Merck, Keytruda, was tested in a smaller subset of patients with more than 50% of the PD-L1 protein. If BMY had copied that trial for Opdivo, the drug may have worked.

Bristol-Myers has a very strong portfolio of cancer drugs, HIV drugs, etc. Revenue is NOT going to change because the drug had never been prescribed for this specific patient demographic. Nothing changed financially for BMY. They had hoped a successful test would have added billions to annual revenue several years into the future but that was just wishful thinking.

There is an existing Phase 3 trial with Opdivo in conjunction with the drug Yervoy for PF-L1 positive patients. If that trial is successful, the Checkmate-026 trial will be immediately forgotten.

BMY is a good company. There is no material reason for a $20 billion market cap haircut. I have change the recommendation to buy a dip to strong support at $50. The decline is continuing and any further market weakness could give us a great entry point.

DIP Entry: With a BMY trade at $51.00

Buy Jan 2018 $55 LEAP Call, estimated to be $4.15. Initial stop loss $44.85

UPSIDE Entry: With a BMY trade at $57.50

Buy Jan 2018 $60 LEAP Call, estimated to be $5.15. Initial stop loss $44.85