Bristol-Myers Squibb Company ( BMY - Analyst Report ) recently suffered a pipeline setback when it voluntarily decided to halt a phase II study of its hepatitis C candidate, BMS-986094 (formerly known as INX-189) due to a safety issue.

Even though it has not yet been determined whether Bristol-Myers’ hepatitis C candidate was responsible for the safety issue, the company is assessing the safety of all the patients in the trial. Following the completion of the safety assessment, Bristol-Myers intends to take appropriate action.

We remind investors that BMS-986094 was added to Bristol-Myers’ pipeline following its acquisition of Inhibitex Inc. earlier this year.

We note that the setback concerning BMS-986094 is the second pipeline-related disappointment at Bristol-Myers over the last month. In July 2012, Bristol-Myers’ brivanib performed disappointingly in a phase III study (BRISK-FL) in the hepatocellular carcinoma indication.

Moreover, in June 2012, the company suffered a regulatory setback when the US Food and Drug Administration (FDA) declined to approve Bristol-Myers/Pfizer’s ( PFE - Analyst Report ) anti-clotting drug Eliquis (apixaban) on the basis of the submitted data and issued a complete response letter. Bristol-Myers and Pfizer are looking to get the blood thinner approved in the US for preventing strokes and systemic embolism in patients suffering from nonvalvular atrial fibrillation (AF). AF refers to a cardiac rhythm disorder characterized by an erratic heartbeat.

Such pipeline/regulatory setbacks have the potential to be major hindrances as Bristol-Myers aims to regroup following the loss of exclusivity of blockbuster blood-thinner Plavix in the US on May 17, 2012. The genericization of Plavix, co-developed with Sanofi ( SNY - Analyst Report ) , has caused significant revenue losses for Bristol-Myers.

Bristol-Myers is looking to combat the generic threat through partnering deals and acquisitions. Apart from acquisitions and partnership deals, Bristol-Myers is looking to introduce new products to augment its product portfolio to combat the generic threat.

Our Recommendation

We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run.