Trump's Comments on Drug Prices Sink Pharma Stocks; Teva Lowers Guidance by $ 1 Billion

The New Year began with the JP Morgan Healthcare Conference— the drug industry’s annual investor meet — where industry leaders were busy announcing deals, until Donald Trump accused the industry of “getting away with murder”. His comments sent shockwaves within the industry as pharma and biotech stocks tanked. In the first Phispers of 2017, we also bring you a compilation of the likely patent conflicts this year. And, there is news on Aurobindo Pharma’s acquisition, Teva's revised guidance for 2017, lowering of growth prospects for Mylan, fresh bribery charges against Novartis and more.

Trump promises aggressive federal bidding process to slash drug prices

Donald Trump, America’s president-elect dropped a bombshell in his first news conference held Wednesday, accusing the pharmaceutical industry of “getting away with murder”. He said he would bring down drug prices, as well as government spending on drugs by changing the way the country bids for drugs.

During the event held at Trump Tower in New York, Trump said: “Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there’s very little bidding on drugs. We’re the largest buyer of drugs in the world, and yet we don’t bid properly.”

The country’s federal law forbids the government from negotiating drug prices with drug companies in order to lower the price of drugs for seniors using Medicare. Trump, however, did not announce how he will address the issue of high drug prices. In the past though, he has called for ending the policy.

His comment came in the midst of the JP Morgan Healthcare Conference, a major annual investor meeting taking place in San Francisco, and knocked down the stocks of biotech and pharmaceutical companies by around 2 percent.

“If anybody is walking away from this conference thinking ‘business as usual,’ I think that’s a mistake,” Heather Bresch, chief executive of Mylan Pharmaceuticals said at the JP Morgan meet.

“The pricing model has got to change. It’s not incremental change; I don’t think that’s what this country needs. I think it’s truly rethinking the business model,” she added. Mylan was under scrutiny recently for repeated list price increases on its lifesaving allergy drug EpiPen.

Teva lowers guidance, Mylan expected to lose US $ 800 million in 2018

Israeli drugmaker Teva revised the predictions it made in July 2016, about its financial expectations for 2017. And these are considerably below its previous expectations. For instance, it laid out a revenue forecast of US $ 23.8 billion to US $ 24.5 billion for 2017, well below the US $ 25.2 billion to US $ 26.2 billion guidance it had previously estimated. Teva now expects its earnings per share (EPS) to be between US $ 4.90 and US $ 5.30 — another big drop from its July guidance of US $ 6.00 to US $ 6.50.

Several industry observers had expected this downward revision. “I think it’s pretty clear that management’s prior expectations for 2017 were very inflated,” Umer Raffat, an Evercore ISI analyst, said.

Meanwhile, Teva began the new year by forking out over US $ 520 million in order to resolve a bribery lawsuit in the US filed by its shareholders. It pertained to its operations in Russia, Ukraine and Mexico.

The year gone by was a turbulent one for Teva. For instance, its US $ 2.3 billion acquisition of Rimsa (short for Representaciones e Investigaciones Médicas, SA de CV), a leading pharmaceutical manufacturing and distribution company in Mexico, went the Ranbaxy way, with the former owners filing a legal complaint against Teva. The complaint mentioned that Teva is suffering from “buyer’s remorse” and is trying to undo the transaction “by any desperate measure” after destroying the Rimsa companies with firings and manufacturing shutdowns.

It’s not just Teva which is set to see a downtrend. Mylan's EpiPen — which hogged the headlines last year for its price hikes — is projected to face substantial decline, until 2018, say analysts.

EpiPen is all set to face competition from Kaleo’s Auvi-Q (another epinephrine injection), which is due for launch in the first half of 2017, Ronny Gal of Bernstein Research said. EpiPen (excluding the generic version) will bring in only US $ 300 million in 2018 for Mylan, down from its US $ 1.1 billion estimate for 2016, Bernstein Research said.

Aurobindo to acquire Portugal’s Generis Farmaceutica

The New Year began with a bang for India’s Aurobindo Pharma. The company said it has inked a pact to acquire Portugal’s Generis Farmaceutica SA from Magnum Capital Partners for a consideration of US $ 143 million (or €135 million).

In a statement, Aurobindo Pharma said the binding agreement has been inked through Aurobindo’s wholly-owned subsidiary — Agile Pharma BV Netherlands. Generis produces and sells pharmaceutical products in Portugal.

The combined entity will benefit from a robust pipeline covering all major molecules coming off patent in the next five years, V Muralidharan, Senior Vice President of European Operations at Aurobindo Pharma, said. “The acquisition of Generis, by leveraging its strong portfolio and unrivalled brand recognition will allow us to establish ourselves as the top generics player in the Portuguese market,” he added.

The deal, however, is conditional, and depends on obtaining necessary approvals from Portuguese authorities. The acquisition deal includes Generis’ manufacturing facility in Amadora (Portugal) with a capacity to produce 1.2 billion tablets/capsules/sachets annually.

Patent battles between the Big Pharma could dominate 2017

This year may well be the year of big patent battles between pharmaceutical giants. It began with a ruling on a patent infringement case involving partners Sanofi-Regeneron and Amgen. A US federal judge ordered French pharmaceutical giant Sanofi and partner Regeneron to stop selling their latest cholesterol treatment — Praluent — due to patent infringement. After the court order, the stocks of Regeneron and Sanofi got hammered.

Sanofi and Regeneron plan to immediately appeal that decision. According to the ruling, Sanofi and Regeneron had infringed biotech giant Amgen’s patents for a rival cholesterol fighting drug — Repatha. Both Praluent and Repatha are the only approved ‘PCSK9 inhibiting’ therapies known to considerably reduce bad cholesterol levels in patients during clinical trials. Both won FDA approval in 2015 and both are expensive — priced at US $ 14,000 per year.

Sanofi is also in a battle with Novo Nordisk. In the last week of December, there was news that Sanofi filed a lawsuit in the US accusing Novo Nordisk of making the false claim that Sanofi’s insulin drugs would no longer be available for many US patients. According to Sanofi, Novo made that claim in order to promote its own competing drug. The complaint seeks an order forcing Novo to pay damages and withdraw marketing materials for its drug Tresiba.

Both Sanofi and Novo have been tied in a regulatory race for their basal insulin/GLP-1 combo diabetes products. But Sanofi is already ahead in the race, as last week it rolled out Soliqua, a combination of (insulin) Lantus and GLP-1 drug Adlyxin, at a list price of US $ 127 for a 300-unit pen. Novo’s Xultophy—which received regulatory approval on November 21—won’t be in the market until early May.

And then there is the battle between Merck and Gilead. The latter ended the year on a sour note after a federal jury in the US ordered Gilead to pay US $ 2.5 billion in royalties to Merck in an ongoing dispute. The legal battle between Merck and Gilead centres around Gilead's flagship hepatitis C cures — Sovaldi and Harvoni. Both these drugs gained disrepute for their lofty prices. Yet they dominated the hepatitis C drug market (before they ran into trouble with insurers and benefits managers who demanded better deals).

Lastly, there is a significant patent battle brewing in experimental biopharma technology in the form of a spat between the University of California and the University of Vienna on one side and the Broad Institute of MIT and Harvard University on the other. The battle centers around CRISPR-Cas9 — an early-stage gene-editing platform that significantly simplifies the process of slicing and dicing problematic genetic material. It is being tested as a treatment option for cancer, sickle cell, and a host of other diseases.

The dispute is around who owns the patent right to CRISPR. While University of California at Berkeley professor Jennifer Doudna and the University of Vienna’s Emannuelle Charpentier were first to announce their discoveries, MIT's Feng Zhang actually won the patent after going through an expedited process.

After Korea, US and China, Novartis faces bribery charges in Greece

In the last one year, Swiss drugmaker Novartis has faced three sets of bribery charges. The fourth one came in the New Year, with Greek officials announcing they are investigating Novartis for bribery in the wake of local media reports raising questions about the company.

Greek corruption prosecutors raided the Athens offices of Novartis last week, as part of the probe over bribery allegations. Greek authorities have reportedly interviewed scores of sources.

In March 2016, Novartis paid US $ 25 million to settle a US Securities and Exchange Commission (SEC) case that claimed the Swiss drug maker paid bribes to health professionals in China to increase sales during 2009 and 2013.

While the US case got settled, Novartis has been accused by a whistleblower in Turkey of paying bribes through a consulting firm to secure business advantages.

In August 2016, PharmaCompass had reported that six former and current Novartis executives at its unit in South Korea allegedly paid more than US $ 2 million to doctors in return for prescribing its medicines. Among those indicted was the former CEO of Novartis’ Korea unit.

Twitter bans Martin Shkreli for making unwanted advances at journalist

In September 2015, Martin Shkreli, the former CEO of Turing Pharmaceuticals, had received widespread flak for raising the price of anti-parasitic drug Daraprim by a factor of 56. Since the Daraprim episode, Shkreli has also been indicted on unrelated fraud charges.

Well, Shkreli is back in news. And once again for all the wrong reasons. A few days back, he was temporarily kicked off Twitter and its live-streaming platform — Periscope — for making unwanted advances toward Lauren Duca, the weekend editor of Teen Vogue.

In a tweet to Twitter’s CEO Jack Dorsey, Duca said: “How is this allowed?” She included two screenshots of Shkreli's Twitter profile page.

Apparently, Shkreli manipulated a photograph of Duca with her husband, wherein he had put his face in place of Duca’s husband. Duca also posted another screenshot wherein Shkreli had put up a montage of Duca’s photos as his Twitter background image, with the text: “For better or worse, till death do us part, I love you with every single beat of my heart.” Moreover, Shkreli’s Twitter bio said that he had a “small crush” on Duca. “Hope she doesn't find out,” it said.

According to the Twitter spokesperson, Twitter’s rules prohibit “targeted harassment”.

Oncology deals: Takeda acquires Ariad; Daiichi ties up with Kite; Ipsen with Merrimack

The JP Morgan conference saw some major deals being announced in the field of oncology. Japan’s Takeda Pharmaceutical Company and Massachusetts-headquartered Ariad Pharmaceuticals recently entered into a definitive agreement under which Takeda will acquire all outstanding shares in Ariad for US $24 per share in cash, in a deal valued at US $ 5.2 billion.

Ariad Pharmaceuticals is a cancer-focused drugmaker. The agreement has been unanimously approved by the boards of directors of both companies. It is likely to close by the end of February this year, subject to required regulatory approvals and other conditions.

Kite Pharma — a California-based, clinical-stage biopharmaceutical company engaged in the development of novel cancer immunotherapy products — has entered into a deal with Daiichi Sankyo of Japan. Kite Pharma will enter the Japanese market, along with Daiichi, which has lined up US $ 250 million deal.

Kite Pharma’s new drug application for the pioneering CAR-T drug —KTE-C19 — is in the final weeks of being completed and shipped to regulators in search of an accelerated approval. CAR-T (short for chimeric antigen receptors-T cell) is a therapy for cancer, using a technique called adoptive cell transfer. The T cells, which can recognize and kill cancer cells, are reintroduced into the patient.

Under the deal, Kite will be taking US $ 50 million upfront and US $ 200 million in milestones for the deal, while Daiichi Sankyo is reserving another US $ 200 million in additional milestones for each new drug candidate that Kite takes to the FDA over the next three years.

Meanwhile, French pharmaceutical company Ipsen has entered into a US $ 1 billion deal to acquire oncology assets from Massachusetts-headquartered Merrimack Pharmaceuticals, including the pancreatic cancer drug Onivyde.

The deal is broken down into two steps, involving an upfront fee of US $ 575 million, to be followed by a potential US $450 million that would depend on approvals for Onivyde in the US.

With this deal, Merrimack is likely to pay off US $ 195 million in debts, return US $ 200 million to stockholders and make a further payment of US $ 450 million to shareholders. Merrimack would also plough US $ 125 million into the development of three experimental cancer drugs.

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