Scrip: industry news and insights
Updates and coverage of the 2020 J.P. Morgan Healthcare Conference in San Francisco.
Acquisition strategy will likely be a prime focus as Gilead, Allergan, Sanofi and others face investors, especially in the wake of Johnson & Johnson’s buy-out of Actelion, ‘the one that got away’ from Sanofi.
Gilead Can Expect Another Series Of Queries On M&A Strategy
With its hepatitis C franchise slowing down and HIV not fully offsetting that, Gilead Sciences Inc. likely will face another litany of questions about its plans for M&A or other deal-making to regain some momentum. At least one analyst says to expect an incremental approach by Gilead, with smaller deals to build up its cancer and immunology pipelines instead of a large-scale acquisition.
"We believe Gilead’s openness to partnerships may be recognition that it will need access to multiple agents with different modalities in order to establish itself in oncology, suggesting collaborations provide access while hedging risk," BMO Capital Markets analyst Ian Somaiya wrote Jan. 12, following a meeting with Gilead management. "We believe this approach to [business development] allows Gilead to deploy cash across more deals, while taking advantage of their accounting treatment, similar to Celgene."
The company also said to expect a continued slowdown in HCV franchise sales, due to continuing decreases in treatment starts during 2017 and potential competition from new products from AbbVie Inc. and Merck & Co. Inc. in 2018. But the picture isn't completely dim for Gilead in that space, Somaiya noted. Management pointed out “that for the past three quarters, the patient starts in totality have been in the 50-60k range consistently, which marks a rate 2.5x higher than before Sovaldi came to the market."
Gilead still has more than an 85% market share in the US, “and that market share is becoming more controllable." Somaiya added. "Overall, it is taking longer for a patient coming into care to be worked up, to be treated, and in specific patient populations (i.e., those with alcohol/drug use, lower fibrosis score), the urgency is not what it used to be."
Another reason for optimism at Gilead is the prospects for HIV candidate bictegravir, slated to report out key Phase II and Phase III data during 2017, Jefferies analyst Brian Abrahams said in a Jan. 11 note. Gilead calls the integrase inhibitor a potential game-changer in HIV, "with optimal properties and expectations for an excellent label."
Investors are also eager to hear about Gilead's multiple-mechanism clinical development efforts in non-alcoholic steatohepatitis, which is being focused on sicker patients with higher fibrosis scores. (Also see "Intercept’s NASH Phase III Enrolling Slowly; Gilead Could Gain Ground" - Scrip, 13 Jan, 2017.) Abrahams said it may seem that growth for Gilead is dependent on M&A, but he predicted that positive data in NASH or with bictegravir could rebuild enthusiasm and optimism around the company's shares. (Also see "Is Gilead Vulnerable to ViiV As It Nears End Of HIV R&D Activity?" - Scrip, 3 Nov, 2016.)
Last Call For Witty
GlaxoSmithKline PLC’s fourth quarter sales and earnings call Feb. 8 will be the final one presided by longtime CEO Andrew Witty, who will most surely have some parting words for investors. The bigger question is when incoming CEO Emma Walmsley will be given an opportunity to address investors and talk about her strategy for driving growth in 2017. The transition appears on track to be a smooth one given the lengthy succession timeline. The former Consumer Healthcare division head was appointed in September to succeed Witty March 31. (Also see "GSK’s New CEO Designate Walmsley Fortifies Volume Growth Strategy" - Scrip, 20 Sep, 2016.)
But there has been some leadership shakeup in the pharmaceuticals and vaccines businesses. In January, the company said Global Pharmaceuticals President Abbas Hussain would resign and be replaced by AstraZeneca PLC’s Luke Miels. (Also see "GSK Management Shake Up Ahead Of New CEO Sees Hussain Out, AZ's Miels In" - Scrip, 19 Jan, 2017.) Investors will expect to hear more about the change in the pharma division’s top ranks.
As far as 2017 growth prospects, a lot depends on whether FDA approves a generic version of GSK’s top-seller Advair. The first ANDA applications are pending at FDA with action expected in the first quarter. But, there’s no guarantee of a first-round approval and in an interview at the J.P. Morgan Healthcare conference, US President Jack Bailey said the company is well positioned to handle the challenge if it comes. (Also see "GSK US Pharma President Jack Bailey On A “Dynamic” 2017" - Scrip, 23 Jan, 2017.)
Praluent Threat, Failed M&A Keep Focus On Shaky Growth Prospects For Sanofi
The restructured French drug maker faces considerable headwinds that investors will want addressed when Sanofi reports on Feb. 8. A primary concern will be whether its PCSK9 inhibitor Praluent (alirocumab), partnered with Regeneron Pharmaceuticals Inc., could be removed from the US market following Amgen Inc.’s recent victory from US District Court.
The judge has delayed the injunction application by 30 days, and plans to appeal the sentence in order to block the injunction at least until the appeal takes place, which usually requires at least 12-18 months. (Also see "‘Between A Rock And A Hard Place,’ Court Issues Injunction To Halt Praluent Sales" - Scrip, 5 Jan, 2017.) The pressure will be even higher now that Amgen has announced the success of its rival cholesterol drug, Repatha (evolocumab), in the FOURIER cardiovascular outcomes trial. (Also see "Amgen’s Repatha Passes CVOT Test, But Contribution To 2017 Sales Growth Unclear" - Scrip, 3 Feb, 2017.)
Sanofi's views on the pressured diabetes market will also be scrutinized. Pricing threats, especially in the US, were underscored in December 2016 with the arrival of the first biosimilar for Lantus – Eli Lilly & Co.'s Basaglar, causing the 2017 outlook to further darken for Sanofi. CVS Caremark and United Health have already decided to exclude Sanofi's Lantus (insulin glargine), which went off-patent in the US in 2015, and Toujeo, its long-acting insulin glargine product, from their commercial formularies. (Also see "CVS Expands Formulary Exclusions In 2017, Express Scripts’ Tally Unchanged" - Pink Sheet, 3 Aug, 2016.)
Expect an update on Sanofi's Soliqua 100/33, formerly referred to as iGlarLixi, which combines Lantus(insulin glargine) and the GLP-1 agonist Adlyxin (lixisenatide), which recently received regulatory approvals in the US and Europe.
Brighter news is hoped for from Sanofi's Genzyme Corp. rare diseases outfit as well as vaccines and consumer health care. That said, the dengue fever vaccine Dengvaxia – perceived as a key driver for the vaccines division for the next couple of years – has had a much slower than expected launch and Sanofi has said it is unlikely to meet its prior sales expectations for 2016, blaming this in large part to Latin American political changes and economic volatility. It had been forecast to bring in €200m in 2016.
Sanofi had been hoping to jumpstart growth with some big acquisitions. CEO Olivier Brandicourt will be hard-pressed by analysts as to why the link with Actelion didn't materialize and will add to his disappointment after losing the takeover fight for Medivation Inc. last year. (Also see "Sanofi CEO Upbeat Despite Medivation M&A Miss, Sarilumab Diss" - Scrip, 31 Oct, 2016.)) Sanofi recently completed the filing of its key breakthrough asset Dupixent (dupilumab) in the US and in Europe and hopes the therapy will be approved later this year in its first indication, atopic dermatitis.
Pricing Important, But Significance Of Allergan Deals, Pipeline Grows
Allergan PLC CEO Brent Saunders is sure to face additional questions during its fourth quarter earnings call on Feb. 8 about his company’s “social contract” to keep US drug price increases at 10% or less per year, especially in light of President Donald Trump’s comments about the biopharma industry’s pricing practices. (Also see "Trump Throws Pharma A Curve Ball On The Third Day Of J.P. Morgan" - Scrip, 12 Jan, 2017.)
However, Saunders also will be pressed about how Allergan will face multiple company-specific pressures in 2017, such as competition for the company’s second best-selling product, Restasis (cyclosporine) for dry eye disease from Shire PLC’s Xiidra (lifitegrast), which appears to be rapidly gaining market share. (Also see "J.P. Morgan Notebook Day 2: Bristol Humbled By Competition, Sanofi’s Sarilumab Ready For Review, Justifying Spinraza’s Price And More" - Scrip, 11 Jan, 2017.)
Leerink analyst Jason Gerberry pointed out potential challenges for Restasis and other key brands in the coming years in a research note in January, including top-seller Botox (onabotulinumtoxinA) facing aesthetic and migraine competition, new irritable bowel syndrome market entrants competing with Linzess (linaclotide), and generic products that will steal sales from the Alzheimer’s therapy Namenda XR (memantine extended-release) and the birth control product Minastrin.
Allergan revealed during its third quarter earnings report in November that it cut its full-year 2016 revenue expectations to a range of $14.45bn to $14.65bn from a prior range of $14.65bn to $14.9bn as generic product pressures ate away at certain brand names. (Also see "Allergan’s Namesake Acquisition Looks Well-Timed As Established Brands Falter" - Scrip, 2 Nov, 2016.) The company gave a preview of its 2017 guidance in early January with expectations for mid-single-digit revenue growth and double-digit earnings per share growth. Leerink’s Gerberry forecast $14.5bn in 2016 revenue and $15.2bn for 2017.
Expect analysts during the fourth quarter earnings call to question Saunders about the company’s acquisition strategy, which includes buying approved and soon-to-be commercial products for which Allergan believes it can increase sales as well as acquisitions of earlier-stage firms with product candidates that can fill the company’s pipeline in or adjacent to its seven therapeutic areas.
Allergan kicked off 2017 with a pair of deals: an option to acquire Lysosomal Therapeutics Inc. in the neuroscience arena and a worldwide license to gastrointestinal programs from Assembly Biosciences Inc. (Also see "Deal Watch: J.P. Morgan Brings Continued Brisk Pace Of Transactions" - Scrip, 12 Jan, 2017.) The company said on Feb. 1 that it has closed the $2.9bn acquisition of commercial-stage, aesthetics-focused regenerative medicine company LifeCell Corp., which was announced in December. (Also see "Allergan Adds Accretive Aesthetics Assets In $2.9bn LifeCell Acquisition" - Scrip, 21 Dec, 2016.)
Saunders highlighted Allergan’s active research and development pipeline, which includes 11 products launched in 2016 and 2017 that are expected to have peak annual sales totaling $5bn, during the company’s J.P. Morgan Healthcare Conference presentation on Jan. 10. He specifically noted six Phase III “stars” among Allergan’s more than 65 mid- and late-stage R&D programs, including Esmya (ulipristal) for uterine fibroids, which showed positive results in the VENUS study in January. (Also see "VENUS II Paves Way For Allergan's Ulipristal NDA In Uterine Fibroids" - Scrip, 17 Jan, 2017.)
Shire Begins Telling Its Ophthalmology Story With Xiidra Market Share Data
Flemming Ornskov has worked to build an ophthalmology franchise at Shire since taking the reigns as CEO nearly four years ago, and the specialty firm can now finally begin talking about commercial results, as a main focus of its Feb. 16 earnings call will be on recently launched dry eye drug Xiidra. (Also see "Shire's Ornskov: The Modest Pediatrician With Fierce Corporate Ambition" - Scrip, 21 Dec, 2016.)
Launched last August, Xiidra was presented as off to a good start during the third quarter earnings call Nov. 1, with $14m in sales and nearly 65,000 prescriptions written after just eight weeks on the market. (Also see "Shire Plays Up Xiidra Launch, Downplays Missed Sales Expectations" - Scrip, 1 Nov, 2016.) Now, the Dublin-based firm will have a fuller picture to describe, as investors await details on growing the drug's sales and market share during its first full quarter on the market.
Previewing Shire's upcoming year in a Jan. 19 note, Deutsche Bank analyst Richard Parkes estimated that Xiidra, positioned against Allergan's Restasis, has captured 20% of the dry eye market and 40% new-to-brand prescriptions already.
"We believe this suggests a [roughly] $340m run rate as gross-to-net adjustments improve over 2017 vs 2017E consensus of $260m," he wrote. "While we expect access programs to limit booked sales in 4Q, consensus assumptions going forward continue to look likely to be exceeded."
Other areas of focus on Shire's call likely will include the ongoing integration of Baxalta Inc. and performance of the hemophilia franchise acquired in that deal. [See Deal] Parkes projected that franchise will show 6% year-over-year growth for the fourth quarter, to nearly $846m, and full-year growth of 3% to more than $2.9bn, making it Shire's largest franchise.
Bayer Awaits Monsanto Merger Closing, May Rely On Licensing To Grow Pipeline
Bayer AG, which will report its fourth quarter and full-year financial results on Feb. 22, is anticipating sales above €16bn from its pharmaceutical unit for 2016 – including sales of €5.5bn from recently launched pharmaceutical products. The company has remained steady in its expectations for the pharma business over the last year, despite some price decreases. (Also see "Bayer Reiterates Pharma Commitment Post-Monsanto, Plays Up Pipeline" - Scrip, 20 Sep, 2016.)
There are some upcoming catalysts for multi-kinase inhibitor Stivarga (regorafenib), which is under review at FDA for second-line hepatocellular carcinoma with a decision expected in the second quarter. Bayer is also due this quarter to report data from the Phase III REGARD trial in colorectal cancer following standard therapy.
Deutsche Bank analyst Tim Race says Bayer's main focus remains on the announced merger with Monsanto, which is expected to close during the second half of 2017. (Also see "Is Bayer Making A Mistake With Monsanto When Pharma Is Its Leading Business?" - Scrip, 27 Jul, 2016.) In a Jan. 31 note, he points out that this tie-up largely constrains Bayer from additional large-scale M&A, but he expects an increase in licensing deals to help grow the pharma pipeline. Overall, he projects a 4% compound annual growth rate for pharma sales from 2016 to 2022, with about €5bn in incremental sales by the end of 2022.
For the Bayer Group, including Crop Science, Consumer Health, Animal Health and Covestro, sales are expected to be in the region of €46bn to €47bn, slightly lower than forecasts from earlier in 2016 of more than €47bn. Crop science has had the weakest performance out for all business units for 2016 and sales are expected to come in level to or below 2015 figures at around €10bn for the full year.
According to Scrip's full-year predictions, Bayer should land in the top 20 companies by drug sales for 2016 – however it will be low in the rankings, coming in around sixteenth. (Also see "Pharma ExtrapolaTable: The 2016 Top 20" - Scrip, 13 Jan, 2017.)Pfizer Inc. is expected to top the table, with total drug sales three times more than its German big pharma rival. Bayer's closest competitors by 2016 drug sales will be Novo Nordisk, Lilly and Takeda.
Valeant Making Its Case
2017 is being eyed as a transition year for Valeant Pharmaceuticals International Inc., which still faces significant challenges in terms of headwinds to revenue growth, investigations and lawsuits that could have financial consequences, and a debt load that totaled almost $30bn at the end of third-quarter 2016. That’s a challenging position to be in as the company reports full-year earnings on Feb. 28.
But analysts were pleased with Valeant’s recent divestitures of Dendreon (and prostate cancer drug Provenge) to Sanpower Group and the sale of three over-the-counter skincare brands to L’Oreal, for a total of $2.1bn in cash being used to pay down debt. (Also see "Debt-laden Valeant Sells Its Assets, More Divestments Likely" - Scrip, 10 Jan, 2017.)
Valeant still faces significant patent expirations in the near-term, Deutsche Bank Market Research analyst Gregg Gilbert said in a Jan. 20 note, “but we believe the short-term set-up looks encouraging as 1) we have moved into a period of enhanced transparency from the company, 2) VRX has begun to execute on asset sales to help address the debt load, and 3) management is willing to sell core assets if the price is right.”
Management is likely to focus on new pipeline products like the psoriasis biologic brodalumab and latanoprostene bunod, an eyedrop for lowering intraocular pressure in glaucoma patients, BTIG analyst Timothy Chang predicted. “While both of these products could receive approval in 2017, we think sales potential for these products could be modest, given the competitive landscape,” he said in a Jan. 10 preview note.
Investors still need to process 2017 guidance and “what the business looks like beyond the 2017 ‘re-basing’ remains a key investor question and consideration,” Gilbert said.
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