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.

Biogen CEO Michel Vounatsos (via Getty Images)

With ad­u­canum­ab caught on a cliff, Bio­gen’s Michel Vounatsos bets bil­lions on an­oth­er high-risk neu­ro play

With its FDA pitch on the Alzheimer’s drug aducanumab hanging perilously close to disaster, Biogen is rolling the dice on a $3.1 billion deal that brings in commercial rights to one of the other spotlight neuro drugs in late-stage development — after it already failed its first Phase III.

The big biotech has turned to Sage Therapeutics for its latest deal, close to a year after the crushing failure of Sage-217, now dubbed zuranolone, in the MOUNTAIN study.

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Pascal Soriot (AP Images)

UP­DAT­ED: As­traZeneca, Ox­ford on the de­fen­sive as skep­tics dis­miss 70% av­er­age ef­fi­ca­cy for Covid-19 vac­cine

On the third straight Monday that the world wakes up to positive vaccine news, AstraZeneca and Oxford are declaring a new Phase III milestone in the fight against the pandemic. Not everyone is convinced they will play a big part, though.

With an average efficacy of 70%, the headline number struck analysts as less impressive than the 95% and 94.5% protection that Pfizer/BioNTech and Moderna have boasted in the past two weeks, respectively. But the British partners say they have several other bright spots going for their candidate. One of the two dosing regimens tested in Phase III showed a better profile, bringing efficacy up to 90%; the adenovirus vector-based vaccine requires minimal refrigeration, which may mean easier distribution; and AstraZeneca has pledged to sell it at a fraction of the price that the other two vaccine developers are charging.

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Covid-19 roundup: Eu­rope pur­chas­es 80M dos­es of Mod­er­na's vac­cine; CO­V­AXX se­cures $2.8B in emerg­ing mar­ket pre-or­ders

With the announcement of its vaccine efficacy data last week, Moderna is starting to line up customers for its Covid-19 mRNA jabs.

The Massachusetts-based biotech announced Wednesday it has agreed to sell an initial round of 80 million doses to the European Commission, with the option to double the amount to 160 million. Once the member states rubber stamp the approval, the deal will be finalized.

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In fi­nal days at Mer­ck, Roger Perl­mut­ter bets big on a lit­tle-known Covid-19 treat­ment

Roger Perlmutter is spending his last days at Merck, well, spending.

Two weeks after snapping up the antibody-drug conjugate biotech VelosBio for $2.75 billion, Merck announced today that it had purchased OncoImmune and its experimental Covid-19 drug for $425 million. The drug, known as CD24Fc, appeared to reduce the risk of respiratory failure or death in severe Covid-19 patients by 50% in a 203-person Phase III trial, OncoImmune said in September.

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Jason Kelly, Ginkgo Bioworks CEO (Kyle Grillot/Bloomberg via Getty Images)

Af­ter Ko­dak de­ba­cle, US lends $1.1B to a syn­thet­ic bi­ol­o­gy com­pa­ny and their big Covid-19, mR­NA plans

In mid-August, as Kodak’s $765 million government-backed push into drug manufacturing slowly fell apart in national headlines, Ginkgo Bioworks CEO Jason Kelly got a message from his company’s government liaison: HHS wanted to know if they, too, might want a loan.

The government’s decision to lend Kodak three quarters of a billion dollars raised eyebrows because Kodak had never made drugs before. But Ginkgo, while not a manufacturing company, had spent the last decade refining new ways to produce materials inside cells and building automated facilities across Boston.

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The ad­u­canum­ab co­nun­drum: The PhI­II failed a clear reg­u­la­to­ry stan­dard, but no one is cer­tain what that means any­more at the FDA

Eighteen days ago, virtually all of the outside experts on an FDA adcomm got together to mug the agency’s Billy Dunn and the Biogen team when they presented their upbeat assessment on aducanumab. But here we are, more than 2 weeks later, and the ongoing debate over that Alzheimer’s drug’s fate continues unabated.

Instead of simply ruling out any chance of an approval, the logical conclusion based on what we heard during that session, a series of questionable approvals that preceded the controversy over the agency’s recent EUA decisions has come back to haunt the FDA, where the power of precedent is leaving an opening some experts believe can still be exploited by the big biotech.

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John Maraganore, Alnylam CEO (Scott Eisen/Bloomberg via Getty Images)

UP­DAT­ED: Al­ny­lam gets the green light from the FDA for drug #3 — and CEO John Maraganore is ready to roll

Score another early win at the FDA for Alnylam.

The FDA put out word today that the agency has approved its third drug, lumasiran, for primary hyperoxaluria type 1, better known as PH1. The news comes just 4 days after the European Commission took the lead in offering a green light.

An ultra rare genetic condition, Alnylam CEO John Maraganore says there are only some 1,000 to 1,700 patients in the US and Europe at any particular point. The patients, mostly kids, suffer from an overproduction of oxalate in the liver that spurs the development of kidney stones, right through to end stage kidney disease.

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Bob Nelsen (Photo by Michael Kovac/Getty Images)

Bob Nelsen rais­es $800M and re­cruits a star-stud­ded board to build the 'Fox­con­n' of biotech

Bob Nelsen spent his pandemic spring in his Seattle home, talking on the phone with Luciana Borio, the scientist who used to run pandemic preparedness on the National Security Council, and fuming with her about the dire state of American manufacturing.

Companies were rushing to develop vaccines and antibodies for the new virus, but even if they succeeded, there was no immediate supply chain or infrastructure to mass-produce them in a way that could make a dent in the outbreak.

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Ramy Farid, Schrödinger CEO (Schrödinger)

Bris­tol My­ers fronts new Schrödinger al­liance with $55M up­front, ex­pand­ing pre­ci­sion on­col­o­gy pro­file

Bristol Myers Squibb has a new R&D partner, one to which they’re paying a pretty penny to use their discovery platform.

The pharma company is doling out $55 million upfront to Schrödinger $SDGR to work on up to five small molecules, with the potential for $2.7 billion in milestone payments. Schrödinger’s initial targets include HIF-2 alpha and SOS1/KRAS for a type of kidney cancer and KRAS-driven cancers, respectively.