Novartis takes a $200M hit to write off a flop as execs spell out a cautious R&D strategy

With its top line locked into a holding pattern as its sales teams struggle to expand franchise revenue, Novartis has outlined its near-term R&D strategy, taking a $200 million hit to write off the disappointing heart drug serelaxin (RLX030) while looking beyond a decision later in the year on its pioneering CAR-T drug as it shoots for new FDA filings.

Joe Jimenez. Novartis

The pharma giant said recently that it has wrapped its initial FDA application for CTL019. And in a new note out from Biren Amin the Jefferies analyst predicts that we’ll be seeing the closely-watched followup data from the JULIET study at the International Conference on Malignant Lymphoma on June 14 in Lugano, Switzerland.

Following a hoped-for approval in CAR-T, Novartis revealed this morning that its discussions with regulators is encouraging the company to aim for a 2018 filing for SEG101 (crizanlizumab) for sickle cell pain crises after it wraps the PK/PD comparability study to final manufacturing process. Right alongside the pharma giant’s R&D team will angle for an FDA approval of BAF312 (siponimod) for relapsing multiple sclerosis.

What you shouldn’t look for: Any big M&A pacts. Like a number of its major league rivals, Novartis execs say that valuations in biotech have reached a forbidding high. Novartis CEO Joe Jimenez adds that the company’s BD team plans to move upstream, to earlier-stage assets and deals, as the company stays focused on what you can get in a $2 billion to $5 billion bolt-on.

“The price of some of these assets has increased to the point that we don’t feel like we can create value for Novartis shareholders,’’ Chief Executive Officer Joe Jimenez said on a conference call Tuesday, according to a report from Bloomberg.

Net income for Novartis slid 15% in the first quarter, which the company largely attributed to the $200 million charge on serelaxin. The write off for its one-time blockbuster hope can’t come as any kind of surprise. A month ago Novartis said that its 4-year study of the heart drug flubbed the primary endpoint, failing to significantly cut the rate of cardiovascular death or reduce worsening heart failure among patients with acute heart failure.

Novartis is left making slow progress with Entresto, which has been grappling with widespread payer resistance. In the meantime, its big flagship drug Gleevec is being hammered by generic competition.

Novartis gained an edge with the March approval of Kisqali (ribociclib), a CDK 4/6 drug which looks like it will have to square off against Pfizer as well as Eli Lilly. And it reworked its commercialization pact with Amgen on their late-stage migraine drug. But it’s also suffered other setbacks in late-stage research, including the Phase III failure last fall of Fovista for wet AMD, which has crimped its pipeline plans.

Novartis is in an awkward position, unwilling or unable to gamble big on new efforts and maintaining a very careful approach to the top line without a megablockbuster able to capture growing sales to fuel its growth. The company is becoming one of the most predictable players in Big Pharma, and that’s not necessarily a good thing.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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