PHARMA DEALS DURING APRIL 2014
(Part 1 out of 3)

As is customary, April's Deal Watch is restricted to deals with disclosed financial terms but what a month it has been!  Not surprisingly the Novartis/ GSK/ Lilly tripartite deal has dominated, however having said that, there has been no let up in the “acquisition feeding frenzy” seen across the industry throughout the month.

Novartis, GSK and Lilly drill down and focus

Just like Alice in her Wonderland relying on transformative potions and cakes we have over recent decades watched large companies in their “Pharmaland” expand and contract as they re-invent their modus operandi.  Most notable has been the wholesale closure of R&D facilities, but did anyone anticipate the game of musical chairs that came to light with the April GSK-Novartis-Lilly deal?

This series of asset-swapping deals, with a total combined value of some $28.5bn, will realign the corporate and marketing landscape for each of these big pharma players. In one fell swoop three new giant specialists will emerge: Novartis claims the cancer crown; GSK vaccines; Lilly Animal Health. In addition, it will see the birth of a new consumer health giant, a joint venture between GSK and Novartis.

So the bottom line is:

• Novartis acquires GSK's oncology products for $14.5bn plus $1.5bn contingent on development milestones in the melanoma space.  Novartis also gains option rights to GSK's current and future oncology R&D pipeline becoming its preferred commercialisation partner.
• GSK acquires Novartis' vaccine business for $7.1bn ($5.25bn upfront; up to $1.8bn in milestones) plus on-going royalties, excluding its influenza business.
• Lilly acquires Novartis' Animal Health franchise for $5.4bn cash.
• Novartis OTC and GSK Consumer Healthcare to form a joint venture, a world leading healthcare business of which Novartis will have a 36.5% share; 4/11 seats on the Board.

It changes here, it changes there, the landscape changes everywhere

Oncology: 

This is the “hot field” in the industry and of course Novartis, a cancer heavyweight is ideally placed to maximise the potential of GSK's, by Andrew Witty's own admission, “nascent oncology business”. Novartis' pipeline includes more than 25 new molecular entities targeting key oncogenic pathways including: Gleevec and its follow-up Tasigna (blood-cancer); Afinitor (kidney cancer and recently approved for breast cancer); Jakavi (rare bone marrow disorder); Signifor (Cushing's disease) plus 16 products in 24 pivotal trials.

GSK's recently approved MEK inhibitor Mekinist and BRAF inhibitor Tafinlar will position Novartis to become a leader in the potential blockbuster market for metastatic melanoma, neglected by their current portfolio. Additional revenues for these two drugs are also promised in other cancer types not to mention their “combo” potential. Indeed a whopping $1.5bn payment depends on the results of the on-going combination trial against Roche's Zelboraf.

Additional GSK products include the VEGFR inhibitor, Votrient (renal cell carcinoma), Tykerb (HER2+metastatic breast cancer), Arzerra (chronic lymphocytic leukaemia) and Promacta (thrombocytopenia).  GSK will continue with its immunotherapy and epigenetics research programmes so in effect will provide a further pipeline source for Novartis which will have co-marketing opt-in rights for any future products.

Vaccines:

Along with Merck & Co and Sanofi, GSK enjoys big player status in the vaccine space and as such can “return the honours” in transforming the commercial prospects of Novartis' vaccine franchise. The icing on the cake is Bexsero for the prevention of meningitis B, which has EU approval and orphan drug designation in the US.  Also included in the meningitis “goodie bag” is the late-stage combo candidate MenABCWY. The new GSK vaccine business will have more than 20 different vaccines in development, including assets to prevent hospital and maternal infections and diseases prevalent in developing countries such as malaria and tuberculosis.  GSK will also acquire additional manufacturing capability in India and China.  Upon closure of the deal GSK will have 29% of the global vaccine market and vaccines will account for 14% of Glaxo's top-line revenues.

Animal health:

The Novartis Animal Health franchise transaction is the 8th and largest acquisition for Elanco, Lilly's Animal Health arm, since 2007 and catapults it to the global number 2 spot in terms of sales, second only to Zoetis. The acquired business includes a portfolio of some 600 products including vaccines and anti-parasite medicines that will provide access to the fish farming market, more than 40 development projects, 9 manufacturing sites, 6 dedicated R&D facilities, and a commercial infrastructure in 40 countries.

Consumer healthcare:

The joint GSK/ Novartis Consumer Healthcare business inherits a leading position in four key OTC categories - Wellness, Oral Health, Nutrition and Skin Health. According to GSK it will generate approximately $10.9bn in annual sales, second only to Johnson & Johnson (J&J). Well-known brands include:

• Pain: Excedrin (Novartis), Beecham's headache powder and Panadol (GSK)  
• Smoking cessation: Nicorette and Nicoderm (GSK), Nicotinell (Novartis) 
• Cold-and-flu: Theraflu and Triaminic (Novartis), Coldrex (GSK)
• Oral care products: toothpastes (Sensodyne), denture adhesive etc (GSK)
• Nutritional supplements: Horlicks (GSK) a big seller in emerging markets, Benefiber (Novartis) fibre supplement.

GSK will be responsible for the OTC manufacturing network, a bonus for Novartis that no doubt will be relieved to be off-loading its troubled Lincoln, NE plant. GSK believes that sales, administrative and overlapping infrastructure synergies for this and the vaccines operations with amount to £1bn savings, 40% of which will be attributed to the consumer business.

Will all this impact on Merck & Co's rumoured sale of its consumer healthcare arm?  Interested parties are thought to include Bayer, Sanofi and Reckitt Benckiser.

And in the end

GSK's transformation will result in a shift away from prescription drugs, restricting its activities to respiratory and HIV, and towards consumer products and vaccines which are less vulnerable to the patent life cycle. All told 24% of its revenues will come from in consumer health, 62% pharmaceuticals and 14% vaccines.

At $16bn Novartis on the surface is paying way over the odds for oncology products that currently bring in $1.6bn, however, replacing low-margin vaccines with high-margin oncology medicines may be well worth the price. Since sinking $7.5bn in the 2006 Chiron buyout, vaccines have been an unhappy place for Novartis eventually making a $165m operating loss in 2013. This deal places Novartis 2nd only to Roche in oncology, an area in which it has a proven track record and which will now generate 20% of total sales. Remaining revenues will come from pharmaceuticals, eye care (Alcon) and generics (Sandoz) and of course its stake in GSK Consumer Health.

Lilly will continue to focus on prescription drugs (diabetes, oncology, neuroscience, cardiovascular, urology etc) but will now also have a world leading position in Animal Health. The Novartis/ Lilly transaction is expected to close by the end of the first quarter 2015 and the Novartis/ GSK transaction during the first half of 2015.

And now for something completely different..

Takeover fever goes wild with April seeing virtually all sectors of the industry affected.  Of the remaining 18 top 21 deals this month, 12 involved wholesale takeovers with deals in Devices (Biomet/ Zimmer Holdings, AccessClosure/ Cardinal Health; New Wave Surgical/ Covidien), Generics/ Speciality Pharma (Questcor/ Mallinckrodt, Ranbaxy Laboratories/ Sun Pharmaceuticals; Silom Medical Company/ Actavis), Pharmaceuticals/Biologics (Furiex/ Forest Laboratories, Andromeda Biotech/ Hyperion Therapeutics), OTC (Insight Pharmaceuticals/ Prestige Brands), Diagnostics (Iquum/ Roche), CRO (Aptiv Solutions/ ICON) and even Stem Cells (California Stem Cell/ NeoStem). Four of these takeovers were in the multi-billion dollar league.

Fuente: PMLiVE

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NEW EU DRUG APPROVALS GREW 42% IN 2013

by Shida Chayesteh

The number of new drugs approved in the EU rose by 42% in 2013 compared with the previous year, the European Medicines Agency (EMA) said on Monday.

EMA approved 81 new drugs in 2013, up from 57 in 2012. The greatest number of approvals appeared in 2009, which hit 117, according to EMA data.

Six of last year's approvals were filed by Danish companies or their partners including Novo Nordisk, Genmab , Lundbeck and Bavarian Nordic.

One in every two applicants, the regulator said, received scientific advice from the agency's Committee for Medicinal Products for Human Use (CHMP) during the development phase of their medicine.

According to EMA, following such advice significantly increases the probability of a positive outcome, with a 90% success rate for companies that request and follow scientific advice compared with 30% success for companies that do not.

Over the past five years, from 2009 to 2013, the average number of new drug approvals per year was 78.6.

"I think the increase reflects that many pharmaceutical companies are in a situation of patent gaps and would like to get some drugs on the market to compensate for the patent expirations," analyst Soren Hansen from Sydbank told Reuters.

In comparison the U.S. Food and Drug Administration (FDA) approved 27 new drugs in 2013, down from a banner year in 2012 which saw 39 drugs approved, the greatest number since 1997 according to FDA data.

But in the future there may well be fewer European approvals, while the U.S. could see higher numbers, Hansen of Sydbank said.

"The U.S. market is a more attractive market to enter because they are more willing to pay for new medicines and innovation," Hansen said.

Danske Bank said in a note to clients on Monday it expected no major launches from Denmark's Novo Nordisk in the U.S. in 2014, but added the company had the potential to launch ten new products in the U.S. from 2014-18.

Fuente: Reuters Health Information

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BIOSIMILARS MARKET IS NOT EQUIVALENT TO GENERICS MARKET

by Ben Comer

For years now, the increased spend on healthcare in the U.S. hasn't evenly correlated with better health outcomes for patients. Despite spending more on healthcare than any other country in the world, the U.S. still trails most developed markets in cost-driving disease areas like heart failure and unmanaged respiratory disease. Citizens of over 20 countries can expect to live longer than Americans. In the U.S., taxpayers aren't getting the outcomes for which they've paid.

As anyone working in the drug industry is quick to point out, spending outlays for pharmaceuticals represent only a tenth of the total healthcare spend; actually 9.3% of the total spend in 2012, according to a September 2013 report from the Office of the Actuary at CMS. 

But that 9.3% is equivalent to $260.8 billion: not exactly pocket change. While a lot of blockbuster drugs lost patent protection in the last few years, and have become available in generic form at a fraction of the price (this fact accounts for the year-over-year decline of 0.8%, to 9.3% of total health spend in 2012), a lot of new drugs are getting approved and launched with bold price tags, and most of them are biologic drugs.

Where are the biosimilars to help cut costs as the first wave of biologics, or complex, small molecule respiratory drugs, for example, go off patent? They've arrived in Europe, but the U.S. lags, in part because biologics patents live longer in the U.S. (unlike its citizens). GSK's Advair, a combination inhaler for asthma and COPD, earned over $8 billion in 2012. It lost patent protection in 2010 and isn't even a biologic drug; it's a small molecule product with a complex, patent-protected inhaler device. To achieve biologic equivalence, FDA in many cases must issue product-specific guidance to inform manufacturers what new clinical trials will be necessary for approval.

That determination – what kind of trials are required, and how many – represents a cost barrier to entry. Many would-be manufacturers simply don't have the resources to successfully develop biosimilars given the cost of clinical trials. On top of that, a biosimilar launch doesn't resemble the flood of generic tablets that follow a small molecule patent expiry. Brand-like commercial teams are needed to educate physicians about new biosimilars, and to drive utilization.

Switzerland-based Sandoz, a division of Novartis, currently has several biosimilar products in phase 3 trials. The company is targeting some of the world's biggest selling products: AbbVie's Humira, Amgen's Enbrel, and Roche's Rituxan. But without the financial backing of parent Novartis, "it would be hard for Sandoz to invest at the level we're investing today," Ameet Mallik, Sandoz's head of biopharmaceuticals and oncology injectables, tells Pharm Exec. Mallik says Sandoz has learned a few things about launching biosimilars based on experience with its "first wave" products including Zarzio, Binocrit and Omnitrope, also known as biosimilar versions of Neupogen, Procrit and Genotropin, respectively. For the company's next wave of biosimilars, "especially the monoclonal antibodies," Sandoz will "take a more branded approach than when we launched the biosimilars in the first wave," says Mallik.

When he took over the business in late 2009, says Mallik, Sandoz and its competitors were "treating [biosimilars] very much like a generic market...if we lower the price, somehow the products will sell themselves." With Omnitrope, a human growth hormone product (approved in the US in 2006, via the 505(b)(2) pathway), Sandoz grew its market share against branded products from 5% to 17% in four years, due to a scale up in field forces, and an increase in its service offering to patients and physicians, says Mallik. Initial access is important, but biosimilar companies also have to "make sure the physician education and training for patients is as good or better than what the original [brand] company was doing," says Mallik.

Combine a robust commercial function with a costly manufacturing and clinical trial capability, and you get a product that needs to charge more than cents on the dollar. "Each one of these [biosimilar] molecules is $100 to $250 million in development costs, over seven to eight years," says Mallik. "Your payback periods are going to be long." Given that the biosimilars market is worth roughly $2.7 billion in 2013, but is expected to climb to nearly $20 billion by 2018, it seems unlikely that health systems, in the U.S. and elsewhere will see a dramatic decline in the overall cost of prescription drugs due to biosimilars.

Fuente: Pharmaceutical Executive

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BRANDED PHARMA REVENUES TO RISE 2%-3% 

IN 2014, ACCORDING TO FITCH RATINGS

by Lynne Taylor

Revenues for brand-name drugmakers will rise just 2%-3% in 2014, forecasts ratings agency Fitch, but it adds that global pharmaceuticals is still one of its highest-rated industries, and that the sector outlook remains “stable.”

Moderate pressure from patent expiries, cost-containment policies in the European Union (EU) and weak employment in the US will be only partly offset by uptake of new products and strong growth in emerging markets, it says in a new report, which expects no significant divergence in the trend in profitability between US and EU-based drugmakers next year. 

Fitch also believes that industry will find patent expiry levels in 2014 to be “manageable.” Patents on roughly $34 billion-worth of branded drug sales are set to expire during the year - accounting for approximately 3.6% of global market sales - compared to $28 billion this year and $55 billion in 2012.

Numbers of new product approvals have been weak this year; as of November 30, the US Food and Drug Administration (FDA) had approved just 24 products, compared to 39 for the whole of 2012. Nevertheless, Fitch believes that 2012-13’s new launches should help support immediate- to long-term growth in the sector.

But it also expects cost-cutting in the sector to continue, aimed at mitigating the effects which soft market dynamics are having on profitability. While selling, general and administrative (SG&A) expenses are the primary targets, R&D spending is also likely to be prioritised at firms including Bristol-Myers Squibb, Pfizer, Merck & Co, AstraZeneca, GlaxoSmithKline and Sanofi, possibly through late-stage development projects, collaborating with other market participants or the prioritisation of pipeline candidates.

And while Eli Lilly & Co has said it will spend heavily on R&D, “it could join its peers should pipeline successes fall short,” it suggests.

Companies are likely to continue divesting businesses that lack a strong strategic fit or offer lower margins and growth rates. GSK has sold its non-core brands and Pfizer has divested its nutritional and animal health businesses, while others are pruning their business portfolios, with Novartis intending to sell its blood transfusion diagnostics business to Grifols, and Johnson & Johnson reportedly seeking a buyer for its clinical diagnostics business, the study points out.

While these divestitures generally improve growth and margin prospects, they also leave firms more narrowly focused, says Fitch, which expects divestments in the sector to remain opportunistic and not to result in any major portfolio reshuffles or extraordinary distributions to shareholders.

Fuente: PharmaTimes

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BIOTECH IPOs: WHAT ENTREPRENEURS CAN LEARN FROM A BANNER YEAR
(Part 2 out of 2)

“What happened in 2000 was there was an overflow phenomenon from the tech boom on the one hand and the tech burst on the other. There was an overabundance of capital looking for opportunities,” Sammut says. “As 2000 wore on and the tech stocks were in free-fall, there was still capital searching for good opportunities, and it buoyed the IPO market”. 

The 2000 biotech boom also coincided with the mapping of the human genome — a milestone that investors mistakenly assumed would lead to an immediate revolution in drug development. “That has not materialized,” Sammut notes.

Now, however, he points out, there are strong signs that the genomic revolution may be starting. In 2012, the FDA approved 39 novel drugs — the highest approval rate in 16 years. The agency green-lit another 27 in 2013. “A large proportion of those drugs were products of the biotechnology industry. That, I think, sounded a wake-up call,” according to Sammut. “Are we at last seeing the fruits of nearly 40 years of investing in biotechnology? We’re at least seeing the front end of that.”

The performance of the Nasdaq Biotechnology Index reflected some of the industry’s recent accomplishments, and likely encouraged managers of privately held companies to jump into the IPO market. The index had a 66% return in 2013 — its best performance in at least 10 years, says David Krein, managing director and head of index research at Nasdaq, adding that in 2012, the biotech index rose 32%. “The big run of IPOs was backloaded in the second half, but it really came after a two-plus year run on biotech stocks generally,” he notes.

Biotech also outperformed the health care industry as a whole. “The health care sector itself was up 42%. So even within health care, biotech was a leader,” Krein says. The Nasdaq US Benchmark Index — which reflects the broader market — was up about 33%, he adds.

Some of the new biotech offerings performed so well last year that they were added to the Nasdaq Biotech Index, including Epizyme, Agios Pharmaceuticals and Chimerix. Because the index serves as the basis for the iShares Nasdaq Biotechnology Index Fund, which is an exchange traded fund (ETF), any company added to it automatically gains access to a whole new group of individual investors. “The ETF market has become in aggregate quite significant in investor portfolios, so these index changes actually result in meaningful capital flows,” Krein says.

Weighing the Pros and Cons of the IPO

The ability to exploit favorable market conditions and gain access to new investors is one of the major advantages of going public, states Wharton finance professor Luke Taylor. But that alone should not drive the decision to go public, he adds. There are, in fact, at least as many cons to the IPO as there are pros, Taylor notes.

“The cons are increased disclosure. You may not want your competitors seeing all your performance information,” he says. “If you’re public, you’re under a lot of pressure to produce short-term results, possibly at the expense of long-term results. There’s a lock-up period of roughly six months when the founders and VCs cannot sell their shares. And you do lose some control.”

Taylor has done research looking at all the factors that surround the decision about whether to go public. The bottom line: Entrepreneurs should ride the news cycle. “As soon as a company gets enough good news, it should go public,” Taylor says. Once a company has enough good news, he adds, the so-called diversification benefit of going public — the ability for the founder and other investors to take their money out of one company and spread it around — outweighs the benefits of staying private. The capital raised also gives the company the ability to accelerate clinical trials of lead drugs, and to take other projects off the back burner, he notes.

Biotech companies that went public in 2013 witnessed the effects of both good and bad news. Acceleron Pharma, for example, rose 164% from its September IPO through the end of the year, according to FactSet. Much of the gain came in December, when the company announced that it had advanced its anemia drug into mid-stage trials, prompting a $7 million milestone payment from its biotech partner, Celgene. On the other end of the stock-performance spectrum was Prosensa Holdings, which dropped 64% from its June debut. It didn’t help that shortly after the IPO, Prosensa announced that its experimental drug to treat Duchenne muscular dystrophy failed in a late-stage clinical trial.

One of the most important lessons the biotech industry will take away from the boom of 2013 will come from observing how the CEOs of the newly public companies manage their capital over the long run, Danzon says. “One of the facts about biotech is that oftentimes, the companies that do succeed have a strategy that is quite different from [what they intended initially],” she notes. “It’s as much betting on management as it is on the actual drugs. If the original strategy fails, there’s always the question of how managers will pull themselves out of that hole. That’s something we’ll only see over the next five-plus years.”

Fuente: KNOWLEDGE@WHARTON

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BIOTECH IPOs: WHAT ENTREPRENEURS CAN LEARN FROM A BANNER YEAR
(Part 1 out of 2)

The data is in, and there is no question that 2013 was the most active year for biotechnology initial public offerings since 2000. During the 12 months ended in December, 38 biotech companies debuted on Wall Street, all but two of which were listed on the Nasdaq exchange, according to FactSet, a Norwalk, Conn.-based provider of financial analytics. The performance of the biotech class of 2013 was rather impressive: As a group, the shares of the newly public companies rose 43% through the end of the year.

Is it a biotech bubble? Or will investors continue to pour money into this exciting but still quite young industry? And what can managers of biotech companies learn about raising capital from the experiences of those who ventured onto the public markets last year? All important questions, to be sure — but challenging to answer in this industry, where disappointments are more common than successes, and the time between an idea for a new medicine and an actual product can be as long as 20 years.

“There’s a huge amount of real uncertainty about the likely performance of some of these companies — scientific uncertainty about whether drugs will pan out in [late-stage] trials and market uncertainty as to how the products will be accepted,” says Patricia Danzon, Wharton professor of health care management. “There have been past booms that have ended up being bubbles, but with these early-stage companies, we may not know until the drugs succeed or fail on the market.”

Danzon notes that one of the most surprising aspects of this biotech boom was that it came at a time when mergers and acquisitions in the life sciences industry — the other popular exit strategy for private investors in small companies — have been rather stagnant. Indeed, the volume of M&A deals in the third quarter of 2013 increased 10% over the previous quarter, but was down by the same amount as compared to the same quarter a year ago, according to a report released in November by PricewaterhouseCoopers.

“It seemed as if, on the one hand, big pharma was looking at these companies and choosing not to acquire, while public investors were willing to acquire them,” Danzon says. “That might suggest that public investors were being overly optimistic.”

Danzon adds that she wouldn’t be surprised if more biotech companies jump through the open IPO window in the coming months, because a public offering can be a much more attractive proposition than an acquisition, particularly in life sciences. “Given the high risks and the significant number of failures that have occurred, pharma tends to acquire now with a lot of payment contingencies,” such as valuations that are tied to the acquired company hitting certain research milestones, she says. “One can see this from the standpoint of the smaller companies. If the IPO window is open, they may choose to go that route rather than accept acquisition offers that have contingencies. The IPO is money you get now. For the investors, it’s probably a better exit.”

The Influence of M&A

Some biotech industry watchers are betting that the resurgence of biotech IPOs will actually re-awaken the appetite for M&A, says Stephen Sammut, a senior fellow in the health care management department at Wharton and a lecturer in the Wharton entrepreneurship program. That’s because publicly held companies are often more attractive bait for potential acquirers than are private biotech firms.

“Most of the biotech acquisitions occur after the companies have gone public,” says Sammut, who is also a partner at Burrill & Co., a San Francisco-based life sciences venture capital firm. “There are two principal reasons for that. The first is that, in most instances, companies don’t become targets for acquisition until their products are much further along in clinical development. The proceeds of the public offering may well allow a company to bring its products to [later stages] of clinical development and therefore be much more attractive to a multinational company for acquisition. The other factor is that it does give acquirers some comfort to know that they’re buying a company that has undergone the scrubbing process of an initial public offering and [Securities and Exchange Commission] filings for some period of time. That translates to risk mitigation on clinical development. They’re more than happy to pay a premium for such companies.”

What’s more, pharma companies are facing increasing pressure to produce growth, which has been hard to come by in recent years due to the loss of patent protection on such blockbuster drugs as Pfizer’s cholesterol pill Lipitor. That’s why many large companies are looking to smaller, more innovative biotech firms to fill their pipelines. Even large companies that are not yet facing patent expirations are showing a willingness to shell out huge sums for smaller innovators. For example, last summer, Amgen upped its offer to buy cancer drug maker Onyx Pharmaceuticals from $9.3 billion to $9.7 billion. Such deals — along with generally healthy balance sheets and access to capital among life sciences companies — prompted PricewaterhouseCoopers to predict that M&A will increase in the coming quarters.

Sammut expects that the appetite for biotech IPOs will also persist, even though there was a slight slowdown toward the end of the year: Only seven biotech firms went public in the fourth quarter, as compared to 15 in the second quarter. The factors driving this boom are quite different than they were in 2000, he says, and current conditions portend a continued enthusiasm for biotech.

Fuente: KNOWLEDGE@WHARTON

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http://msg-latam-meic.blogspot.com.ar/2014/04/programa-ejecutivo-en-management.html

Programa Ejecutivo en GESTIÓN DEL CAMBIO

http://msg-latam-meic.blogspot.com.ar/2014/04/programa-ejecutivo-en-gestion-del.html

Taller de ESTRATEGIAS EFECTIVAS para ESCENARIOS TURBULENTOS

http://msg-latam-meic.blogspot.com.ar/2014/04/taller-de-estrategias-efectivas-para.html

Por dictado IN COMPANY, consultar al mail: msg.latam@gmail.com

ó al +5411-3532-0510