Frank Curzio
By Frank CurzioNovember 15, 2015

Why Bristol-Myers is My Favorite Healthcare Stock for 2016

For the first time ever, we are winning the battle against cancer.

More people are living for years — instead of a few months — after being diagnosed with some of the deadliest forms of cancer. This includes melanoma, lung and pancreatic cancer.

The breakthrough treatment that’s helping patients live longer is called immunotherapy. And healthcare giant Bristol-Myers Squibb (BMY) is the undisputed leader in the “Immuno-Oncology” industry.

I recommended buying Bristol-Myers about a year ago. Since my call, the stock is up 12%. That’s much better than the overall market — which is trading roughly flat on the year.

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However, all my research tells me Bristol-Myers has much more upside ahead. In fact, shares could pop 30% or more as sales for the company’s signature cancer-fighting drug are set to explode over the next 12 months.

Let me explain …

In January, I talked about the huge breakthroughs we’ve seen in immunotherapy. This technology helps train your immune system to attack tumors.

You see, cancer is one of the rare diseases that “tricks” the immune system.

Tumors flourish because the body doesn’t initially recognize them as invaders or threats. And when the body does recognize them, it attacks for a while and then gives up. It decides the battle is not worth fighting.

Immunotherapy tells your immune system to keep fighting. More important, this new treatment gets the immune system to target and attack cancer cells only.

Bristol-Myers Squibb (BMY) is the leader in immunotherapy. Its signature drug is called Opdivo. It was approved by the FDA late last year to treat advanced melanoma.

Through 2015, Opdivo was in numerous trials to treat other forms of cancer including kidney, lung, head and neck, bladder, and Hodgkin and non-Hodgkin lymphoma.

The trial results for Opdivo have been impressive across the board. In fact, the FDA recently approved Opdivo to treat advanced lung cancer. This opens up another huge revenue stream for the company.

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Opdivo (blue line) vs. chemotherapy (gray line) in patients with non-small cell lung cancer. Image credit: BMY

For example, Opdivo generated $305 million in sales last quarter (reported on Oct 26). However, sales are expected to explode to more than $2 billion in 2016 — and more than $8 billion in 2020,according to Goldman Sachs.

Based on consensus estimates, Bristol-Myers is projected to increase sales from $16.3 billion in 2015 to $19.5 billion in 2017. That’s an increase of 20%. Earnings are expected to jump from $1.90 in 2015 to $3.15 in 2017. That’s an increase of 66% — or more than 30% annually over the next two years.

Yet, the big gains in Bristol-Myers will likely be made over the next 12 months.

That’s when we will see more trial results (in other forms of cancer) from Opdivo. This could open up multiple billion-dollar markets for Bristol-Myers.

In other words, analysts’ earnings estimates on Bristol-Myers may prove to be conservative.

The immunotherapy platform for Bristol-Myers is the best-in-class when it comes to treating cancer. That’s why it’s one of the only large-cap healthcare companies that’s projected to see 30%-plus annual earnings growth over the next few years.

Bristol-Myers has huge upside potential. And I expect most of this upside to take place over the next 12 months as positive trial results from Opdivo continue to hit the wires.

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