Meacham’s man­i­festo to Gilead: It’s time to do some­thing dra­mat­ic — buy, bag or burn

Af­ter watch­ing Gilead’s pipeline fal­ter in the sec­ond half of last year fol­lowed by a stun­ning fore­cast of rapid­ly shrink­ing rev­enue for its hep C fran­chise, Bar­clays se­nior an­a­lyst Ge­off Meacham has had it. In an un­usu­al pub­lic broad­side aimed at Gilead $GILD CEO John Mil­li­gan and his ex­ec­u­tive team, Meacham threw down the gaunt­let in an open let­ter to man­age­ment, call­ing out plays from the bleach­ers de­signed to spur the big biotech to buy some­thing and even pos­si­bly re­struc­ture if the num­bers de­te­ri­o­rate much fur­ther.

Meacham made it clear that this will not come as a sur­prise to Gilead’s team.

John Mil­li­gan

“A trans­for­ma­tion­al or even in­cre­men­tal trans­ac­tion has been the fo­cal point for per­haps 90% of our dis­cus­sions on Gilead over the past three years,” he says.

Meacham has been in the Greek choir of an­a­lysts who rou­tine­ly note that Gilead needs to use its con­sid­er­able cash re­serves to get a deal done now. He notes that the com­pa­ny will have di­min­ish­ing ca­pac­i­ty for deals as its cash flow weak­ens. And he’s not too par­tic­u­lar about what Gilead — a com­pa­ny that made a cou­ple of the best takeovers in the his­to­ry of biotech — buys next.

Can’t find some­thing strate­gic? No prob­lem. Meacham’s recipe for a turn­around high­lights some non-core pos­si­bil­i­ties that are hot these days. And he’s even very spe­cif­ic about what kind of drugs Gilead should go af­ter.

First, we think that the or­phan busi­ness mod­els fits well with­in Gilead’s cost struc­ture. Of course, this falls in­to “fi­nan­cial, not strate­gic” cat­e­go­ry but or­phan fran­chis­es in PNH/aHUS or CF, for ex­am­ple, could pro­vide a long-term, durable busi­ness with 2020 rev­enues north of $4B. We think that di­ver­si­fi­ca­tion out­side of an­ti- vi­rals would be very well-re­ceived by most in­vestors with the ben­e­fits from an im­prov­ing busi­ness mix out­weigh­ing po­ten­tial near-term di­lu­tion.

Ge­off Meacham

Don’t over­look a pipeline op­por­tu­ni­ty ei­ther, Meacham ad­vis­es. But woe to Gilead or any com­pa­ny that tries to buy an­oth­er com­pa­ny the same size and then slash jobs with the job-cre­at­ing Pres­i­dent Trump in the White House.

There are many com­pa­nies that fall in­to this cat­e­go­ry in­clud­ing those with and IDO or PARP in­hibitor or a Hodgkin’s lym­phoma fran­chise. Last­ly, we don’t think that a merg­er of equals with a larg­er bio­phar­ma would make sense giv­en that cost syn­er­gies (i.e., lay­offs) could be a sig­nif­i­cant head­wind in this po­lit­i­cal en­vi­ron­ment, shares may not be award­ed a high­er P/E mul­ti­ple, and busi­ness com­plex­i­ty would in­crease dra­mat­i­cal­ly. In this re­spect, buy­ing a mar­ket lead­ing I/O fran­chise or a mul­ti­ple myelo­ma fran­chise seems less val­ue-add to us.

Don’t like M&A val­ues these days? Go for a cam­paign of in-li­cens­ing deals. Sure that the bicte­gravir-TAF Phase III pro­gram will come through? Spell out some rev­enue pro­jec­tions. Ex­pect hep C rev­enue to de­vel­op in­to a tail­spin? Think about re­struc­tur­ing and cut­ting costs. And fi­nal­ly, stop spend­ing so much mon­ey on buy­backs and div­i­dends. That pow­der needs to be con­served for big­ger game.

UP­DAT­ED: In sur­prise switch, Bris­tol-My­ers is sell­ing off block­buster Ote­zla, promis­ing to com­plete Cel­gene ac­qui­si­tion — just lat­er

Apart from revealing its checkpoint inhibitor Opdivo blew a big liver cancer study on Monday, Bristol-Myers Squibb said its plans to swallow Celgene will require the sale of blockbuster psoriasis treatment Otezla to keep the Federal Trade Commission (FTC) at bay.

The announcement — which has potentially delayed the completion of the takeover to early 2020 — irked investors, triggering the New York-based drugmaker’s shares to tumble Monday morning in premarket trading.

Celgene’s Otezla, approved in 2014 for psoriasis and psoriatic arthritis, is a rising star. It generated global sales of $1.6 billion last year, up from the nearly $1.3 billion in 2017. Apart from the partial overlap of Bristol-Myers injectable Orencia, the company’s rival oral TYK2 psoriasis drug is in late-stage development, after the firm posted encouraging mid-stage data on the drug, BMS-986165, last fall. With Monday’s decision, it appears Bristol-Myers is favoring its experimental drug, and discounting Otezla’s future.

The move blindsided some analysts. Credit Suisse’s Vamil Divan noted just days ago:

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,400+ biopharma pros reading Endpoints daily — and it's free.

Novotech CEO Dr. John Moller

Novotech CRO Award­ed Frost & Sul­li­van Best Biotech CRO Asia-Pa­cif­ic 2019

Known in the in­dus­try as the Asia-Pa­cif­ic CRO, Novotech is now lead CRO ser­vices provider for the grow­ing num­ber of in­ter­na­tion­al biotechs se­lect­ing the re­gion for their stud­ies.

Re­flect­ing this Asia-Pa­cif­ic growth, Novotech staff num­bers are up 20% since De­cem­ber 2018 to 600 in-house clin­i­cal re­search peo­ple across a full range of ser­vices, across the re­gion.

Novotech’s ca­pa­bil­i­ties have been rec­og­nized by an­a­lysts like Frost & Sul­li­van, most re­cent­ly with the pres­ti­gious Asia-Pa­cif­ic CRO Biotech of the year award for best prac­tices in clin­i­cal re­search for biotechs for the fifth year. See oth­er awards here.

Dean Hum. Nasdaq via YouTube

Gen­fit goes to Chi­na with a deal worth up to $228M for NASH drug

Fresh off the high of its Nas­daq IPO de­but, and the low of com­par­isons to Cymabay — whose NASH drug re­cent­ly stum­bled — Gen­fit on Mon­day un­veiled an up to $228 mil­lion deal with transpa­cif­ic biotech Terns Phar­ma­ceu­ti­cals to de­vel­op its flag­ship ex­per­i­men­tal liv­er drug — elafi­bra­nor — in Greater Chi­na.

The deal comes more than a week af­ter Gen­fit $GN­FT is­sued a fiery de­fense of its dual PPAR ag­o­nist elafi­bra­nor, when com­peti­tor Cymabay’s PPARδ ag­o­nist, se­ladel­par, fiz­zled in a snap­shot of da­ta from an on­go­ing mid-stage tri­al. The main goal at the end of 12 weeks was for se­ladel­par to in­duce a sta­tis­ti­cal­ly sig­nif­i­cant im­prove­ment in liv­er fat con­tent, but da­ta showed that pa­tients on the place­bo ac­tu­al­ly per­formed bet­ter.

Fol­low­ing news of job cuts in Eu­ro­pean R&D ops, Sanofi con­firms it’s of­fer­ing US work­ers an 'ear­ly ex­it'

Ear­li­er in the week we learned that Sanofi was bring­ing out the bud­get ax to trim 466 R&D jobs in Eu­rope, re­tool­ing its ap­proach to car­dio as re­search chief John Reed beefed up their work in can­cer and gene ther­a­pies. And we’re end­ing the week with news that the phar­ma gi­ant has al­so been qui­et­ly re­duc­ing staff in the US, tar­get­ing hun­dreds of jobs as the com­pa­ny push­es vol­un­tary buy­outs with a fo­cus on R&D sup­port ser­vices.

Suf­fer­ing No­var­tis part­ner Cona­tus is pack­ing it in on NASH af­ter a se­ries of un­for­tu­nate tri­al events

The NASH par­ty is over at No­var­tis-backed Cona­tus. And this time they’re turn­ing off the lights.

More than 2 years af­ter No­var­tis sur­prised the biotech in­vest­ment com­mu­ni­ty with its $50 mil­lion up­front and promise of R&D sup­port to part­ner with the lit­tle biotech on NASH — ig­nit­ing a light­ning strike for the share price — Cona­tus $CNAT is back with the lat­est bit­ter tale to tell about em­ri­c­as­an, which once in­spired con­fi­dence at the phar­ma gi­ant.

Alex­ion wins pri­or­i­ty re­view for Ul­tomiris' aHUS in­di­ca­tion; FDA ex­pands ap­proval of Ver­tex's Symdeko

→ Alex­ion $ALXN has scored a speedy re­view for Ul­tomiris for pa­tients with atyp­i­cal he­molyt­ic ure­mic syn­drome (aHUS) af­ter post­ing pos­i­tive da­ta from a piv­otal study in Jan­u­ary. The drug is the rare dis­ease com­pa­ny’s shot at pro­tect­ing its block­buster blood dis­or­der fran­chise that is cur­rent­ly cen­tered around its flag­ship drug, Soliris, which is a com­ple­ment in­hibitor typ­i­cal­ly ad­min­is­tered every two weeks. Ul­tomiris has a sim­i­lar mech­a­nism of ac­tion but re­quires less-fre­quent dos­ing — every eight weeks. The de­ci­sion date has been set to Oc­to­ber 19. Late last year, Ul­tomiris se­cured ap­proval for noc­tur­nal he­mo­glo­bin­uria (PNH) pa­tients.

Bet­ter than Am­bi­en? Min­er­va soars on PhI­Ib up­date on sel­torex­ant for in­som­nia

A month af­ter roil­ing in­vestors with what skep­tics dis­missed as cher­ry pick­ing of its de­pres­sion da­ta, Min­er­va is back with a clean slate of da­ta from its Phase IIb in­som­nia tri­al.

In a de­tailed up­date, the Waltham, MA-based biotech said sel­torex­ant (MIN-202) hit both the pri­ma­ry and sev­er­al sec­ondary end­points, ef­fec­tive­ly im­prov­ing sleep in­duc­tion and pro­long­ing sleep du­ra­tion. In­ves­ti­ga­tors made a point to note that the ef­fects were con­sis­tent across the adult and el­der­ly pop­u­la­tions, with the lat­ter more prone to the sleep dis­or­der.

Gene ther­a­py biotech sees its stock rock­et high­er on promis­ing re­sults for rare cas­es of but­ter­fly dis­ease

Shares of Krys­tal Biotech took off this morn­ing $KRYS af­ter the lit­tle biotech re­port­ed promis­ing re­sults from its gene ther­a­py to treat a rare skin dis­ease called epi­der­mol­y­sis bul­losa.

Fo­cus­ing on an up­date with 4 new pa­tients, re­searchers spot­light­ed the suc­cess of KB103 in clos­ing some stub­born wounds. Krys­tal says that of 4 re­cur­ring and 2 chron­ic skin wounds treat­ed with the gene ther­a­py, the KB103 group saw the clo­sure of 5. The 6th — a chron­ic wound, de­fined as a wound that had re­mained open for more than 12 weeks — was par­tial­ly closed. That brings the to­tal so far to 8 treat­ed wounds, with 7 clo­sures.

Ab­b­Vie gets a green light to re­sume re­cruit­ing pa­tients for one myelo­ma study — but Ven­clex­ta re­mains un­der a cloud

Three months af­ter reg­u­la­tors at the FDA forced Ab­b­Vie to halt en­rolling pa­tients in its tri­als of a com­bi­na­tion us­ing Ven­clex­ta (vene­to­clax) to treat drug-re­sis­tant cas­es of mul­ti­ple myelo­ma, the agency has green-light­ed the re­sump­tion of one of those stud­ies, while keep­ing the rest on the side­lines.

The CANO­VA (M13-494) study can now get back in busi­ness re­cruit­ing pa­tients to test the drug for a pop­u­la­tion that shares a par­tic­u­lar ge­net­ic bio­mark­er. To get that per­mis­sion, Ab­b­Vie — which is part­nered with Roche on this pro­gram — was forced to re­vise the pro­to­col, mak­ing un­spec­i­fied changes in­volv­ing risk mit­i­ga­tion mea­sures, pro­to­col-spec­i­fied guide­lines and an up­dat­ed fu­til­i­ty cri­te­ria.