Is Bristol-Myers fading back in its hot race with Merck for PD-1 lead?

When you're racing an eager giant with a blockbuster prize waiting at the finish line, your pace is going to be closely scrutinized by the punters. That is the position that Bristol-Myers Squibb ($BMY) finds itself in today, as investors look right past swelling profits to focus on the company's execution of its development program for the cancer immunotherapy nivolumab.

And they weren't happy about what they saw.

Management sounded a note of caution on Friday, which wasn't something the analysts and investors were in a mood to hear. Instead of blitzing straight into a late-stage program that combined nivolumab with Yervoy--which has produced some stellar results--BMS plans to continue with its mid-stage work for a while.

"Based on our assessment of the preliminary data, we will continue the cohorts of patients before beginning a registrational study," R&D chief Francis Cuss said in a call, according to Bloomberg. "We'll certainly know a lot more about nivolumab a year from now."

Investors, though, don't want to wait a year. The new R&D chief's hesitation looked like a setback to many, spurring suggestions that there may be problems with the combo. Bristol's shares sagged over the day.

"Many investors expected Bristol-Myers to rapidly advance the Nivo-Yervoy combo to Phase III, with the plans for such a move perhaps being announced as early as today," BMO analyst Alex Arfaei said in a research note, according to a Reuters report.

What's bad for Bristol-Myers, though, is a tonic for long-struggling Merck. New R&D chief Roger Perlmutter has put himself on point for their PD-1 program for MK-3475, with newly announced plans to wrap a rolling submission for the drug in the first half of this year. For a company which earned a reputation as an R&D slow poke, it was a sign that the pharma giant is getting serious about execution. Combined with a few other hopeful signs in R&D, the company picked up an upgrade today that is helping to fuel speculation that the company might be turning a corner. And more upgrades are likely, says ISI's Mark Schoenebaum, who joined in on the fretting about nivolumab.

"I think BMY's tone on its Friday conference indicated that the combination of Yervoy plus PD-1 in lung may not have been a 'home run,'" noted Schoenebaum in one of his quick notes this morning. "There are, of course alternative explanations, such as BMY is just playing it very close to the vest due to the hyper-competitive nature of the PD-1 market (we'll see the data at ASCO; also, remember that BMY is an exceptionally smart/strategic company)."

- here's the Reuters story 
- read the Bloomberg piece

Special Report: 10 top drugs in biopharma's late-stage pipeline - Nivolumab, Bristol-Myers Squibb