Pfiz­er to com­bine its off-patent drug unit with My­lan

Pfiz­er — My­lan’s man­u­fac­tur­ing part­ner for its flag­ship EpiPen — is com­bin­ing its off-patent drug busi­ness with the gener­ic drug­mak­er, in a hair­cut de­signed to fo­cus on the health­i­er parts of its busi­ness.

The trans­ac­tion is ex­pect­ed to come in the form of a stock deal in which My­lan $MYL share­hold­ers would own a lit­tle more than 40% of the new en­ti­ty and Pfiz­er $PFE share­hold­ers the re­main­der. Pfiz­er is al­so slat­ed to re­ceive about $12 bil­lion in pro­ceeds from a new sale of debt.

The busi­ness, called Up­john, is based in Shang­hai (to fo­cus on emerg­ing mar­kets), and in­cludes prod­ucts that once gen­er­at­ed block­buster sales such as the cho­les­terol drug Lip­i­tor, the erec­tile dys­func­tion drug Vi­a­gra and the painkiller Lyri­ca.

The US gener­ics in­dus­try has suf­fered in re­cent years due to pric­ing pres­sure and com­pe­ti­tion from man­u­fac­tur­ers based in low-and-mid­dle-in­come coun­tries such as In­dia. Gener­ic drug mak­ers have been con­sol­i­dat­ing in the hope that economies of scale will steady the ship and al­low them to in­vest fur­ther in­to biosim­i­lars, which bring rich­er prof­its ver­sus their gar­den va­ri­ety gener­ic med­i­cine coun­ter­parts.

Ken Cac­cia­tore Cowen

Last year, In­dia’s Au­robindo Phar­ma inked a deal to pur­chase parts of No­var­tis’ $NVS gener­ic med­i­cine busi­ness for up to $1 bil­lion. Te­va $TE­VA  — the world’s largest gener­ic mak­er — bought Al­ler­gan’s vast gener­ic busi­ness in a $40.5 bil­lion deal in 2015.

Will the deal fix My­lan’s woes? No, said Cowen’s Ken Cac­cia­tore in a note. For 2019, man­age­ment is an­tic­i­pat­ing ad­just­ed free cash flow to reach $1.9 bil­lion to $2.3 bil­lion — dra­mat­i­cal­ly low­er ver­sus 2018 — and es­sen­tial­ly the same as the 2015 lev­els, he point­ed out. 

“(W)e have long felt that stand­alone My­lan was ab­solute­ly bro­ken…this de­te­ri­o­ra­tion of ad­just­ed free cash flow over the last few years has been de­spite a tremen­dous in­vest­ment ($15B+) to­ward both com­pa­ny and prod­uct ac­qui­si­tions,” he wrote.

“(E)ven with the launch­es of Co­pax­one, Neu­las­ta, Ad­vair and oth­ers that should add $1B+ in 2019, these ap­provals are on­ly pro­vid­ing some re­lief, but are not al­ter­ing the sys­temic prob­lems in­her­ent with the gener­ic mod­el. Very rarely do we see such a sys­temic and wealth de­stroy­ing mess,” he added.

The com­bined en­ti­ty is ex­pect­ed to gen­er­ate pro for­ma rev­enue of $19 to $20 bil­lion next year, the com­pa­nies said.

The Up­john/My­lan guid­ance is ac­tu­al­ly mod­est­ly low­er than what Cac­cia­tore had first pre­dict­ed. “This on­ly adds con­vic­tion to our orig­i­nal the­sis that this merg­er will solve noth­ing, and that the pres­sure and neg­a­tive view of the com­bi­na­tion will like­ly on­ly in­crease in­to the even­tu­al close,” he wrote.

My­lan chief Heather Bresch is set to de­part to make room for Pfiz­er’s Michael Goet­tler, the cur­rent group pres­i­dent of Up­john, who will take over as the com­bined com­pa­ny’s CEO. Bresch in­vit­ed a storm of crit­i­cism in 2016 af­ter pric­ing a pair of EpiPen’s for more than $600, up from the from $100 in 2007, when My­lan ac­quired the prod­uct. Un­der siege, the com­pa­ny even­tu­al­ly start­ed sell­ing its own gener­ic ver­sion at a 50% dis­count.

How­ev­er, oth­er mem­bers of the se­nior My­lan team will al­so stick around. Chair­man Robert Coury, will serve as ex­ec­u­tive chair­man of the new com­pa­ny and Ra­jiv Ma­lik, cur­rent My­lan Pres­i­dent, will re­main as pres­i­dent of the com­bined en­ti­ty.

“Many are ar­gu­ing that this new en­ti­ty will find it­self bet­ter po­si­tioned than stand­alone My­lan. We are not sure that is the right ques­tion, and we are now even more un­sure whether that state­ment is even ac­cu­rate giv­en…that the se­nior My­lan man­age­ment still ap­pears that they are firm­ly in con­trol,” Cac­cia­tore said.

Al­bert Bourla

Pfiz­er, in re­cent months, has been try­ing to rein­vent it­self. Al­bert Bourla took over the reins of the com­pa­ny, af­ter his pre­de­ces­sor Ian Read spent some time away from M&A to fo­cus on the com­pa­ny’s in­ter­nal pipeline — af­ter some of his bets went sour (re­mem­ber Medi­va­tion?) and gener­ic com­pe­ti­tion took a bite out of the com­pa­ny’s once-biggest sell­ers. Bourla has since re­vert­ed to Pfiz­er’s ag­gres­sive deal-mak­ing roots to re­vive growth by sharp­en­ing fo­cus on can­cer, heart and rare dis­eases.

In late De­cem­ber, Pfiz­er an­nounced plans to cre­ate a con­sumer health pow­er­house with GSK $GSK in the form of a joint ven­ture, and then spin it out. In May, the com­pa­ny agreed to pay up to $810 mil­lion to buy pri­vate Swiss biotech­nol­o­gy com­pa­ny Ther­a­chon for its ex­per­i­men­tal ther­a­py to treat dwarfism. Last month, Pfiz­er agreed to shell out $11.4 bil­lion for on­col­o­gy com­pa­ny Ar­ray Bio­phar­ma.

“We do not as­sume that tak­ing this ac­tion now fore­tells the suc­cess of PFE’s new prod­ucts, but we al­so can­not dis­count that thought en­tire­ly. It is un­like­ly that this deal was a com­pet­i­tive sit­u­a­tion, since few com­pa­nies could have un­der­tak­en a sim­i­lar move, so it prob­a­bly could have been ex­e­cut­ed in 1-2 years just as eas­i­ly,” Cowen’s Steve Scala an­a­lysts wrote in a note.

“Whether PFE share­hold­ers wish to hold MYL stock is an­oth­er ques­tion, as they are un­like­ly to own PFE shares for Up­john. What ex­po­sure PFE Bio­phar­ma has to emerg­ing mar­kets is un­clear, but it clear­ly will no longer have an in­dus­try-lead­ing po­si­tion.”

The Wall Street Jour­nal and lat­er Reuters over the week­end first re­port­ed the deal.

So­cial im­age: Pfiz­er, AP Im­ages

Patrik Jonsson, the president of Lilly Bio-Medicines

Who knew? Der­mi­ra’s board kept watch as its stock price tracked Eli Lil­ly’s se­cret bid­ding on a $1.1B buy­out

In just 8 days, from December 6 to December 14, the stock jumped from $7.88 to $12.70 — just under the initial $13 bid. There was no hard news about the company that would explain a rise like that tracking closely to the bid offer, raising the obvious question of whether insider info has leaked out to traders.

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2019 Trin­i­ty Drug In­dex Eval­u­ates Ac­tu­al Com­mer­cial Per­for­mance of Nov­el Drugs Ap­proved in 2016

Fewer Approvals, but Neurology Rivals Oncology and Sees Major Innovations

This report, the fourth in our Trinity Drug Index series, outlines key themes and emerging trends in the industry as we progress towards a new world of targeted and innovative products. It provides a comprehensive evaluation of the performance of novel drugs approved by the FDA in 2016, scoring each on its commercial performance, therapeutic value, and R&D investment (Table 1: Drug ranking – Ratings on a 1-5 scale).

How to cap­i­talise on a lean launch

For start-up biotechnology companies and resource stretched pharmaceutical organisations, launching a novel product can be challenging. Lean teams can make setting a launch strategy and achieving your commercial goals seem like a colossal undertaking, but can these barriers be transformed into opportunities that work to your brand’s advantage?
We spoke to Managing Consultant Frances Hendry to find out how Blue Latitude Health partnered with a fledgling subsidiary of a pharmaceutical organisation to launch an innovative product in a
complex market.
What does the launch environment look like for this product?
FH: We started working on the product at Phase II and now we’re going into Phase III trials. There is a significant unmet need in this disease area, and everyone is excited about the launch. However, the organisation is still evolving and the team is quite small – naturally this causes a little turbulence.

Aymeric Le Chatelier, Ipsen

A $1B-plus drug stum­bles in­to an­oth­er big PhI­II set­back -- this time flunk­ing fu­til­i­ty test -- as FDA hold re­mains in ef­fect for Ipsen

David Meek

At the time Ipsen stepped up last year with more than a billion dollars in cash to buy Clementia and a late-stage program for a rare bone disease that afflicts children, then CEO David Meek was confident that he had put the French biotech on a short path to a mid-2020 launch.

Instead of prepping a launch, though, the company was hit with a hold on the FDA’s concerns that a therapy designed to prevent overgrowth of bone for cases of fibrodysplasia ossificans progressiva might actually stunt children’s growth. So they ordered a halt to any treatments for kids 14 and under. Meek left soon after to run a startup in Boston. And today the Paris-based biotech is grappling with the independent monitoring committee’s decision that their Phase III had failed a futility test.

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FDA’s golodirsen CRL: Sarep­ta’s Duchenne drugs are dan­ger­ous to pa­tients, of­fer­ing on­ly a small ben­e­fit. And where's that con­fir­ma­to­ry tri­al?

Back last summer, Sarepta CEO Doug Ingram told Duchenne MD families and investors that the FDA’s shock rejection of their second Duchenne MD drug golodirsen was due to some concerns regulators raised about the risk of infection and the possibility of kidney toxicity. But when pressed to release the letter for all to see, he declined, according to a report from BioPharmaDive, saying that kind of move “might not look like we’re being as respectful as we’d like to be.”

He went on to assure everyone that he hadn’t misrepresented the CRL.

But Ingram’s public remarks didn’t include everything in the letter, which — following the FDA’s surprise about-face and unexplained approval — has now been posted on the FDA’s website and broadly circulated on Twitter early Wednesday.

The CRL raises plenty of fresh questions about why the FDA abruptly decided to reverse itself and hand out an OK for a drug a senior regulator at the FDA believed — 5 months ago, when he wrote the letter — is dangerous to patients. It also puts the spotlight back on Sarepta $SRPT, which failed to launch a confirmatory study of eteplirsen, which was only approved after a heated internal controversy at the FDA. Ellis Unger, director of CDER’s Office of Drug Evaluation I, notes that study could have clarified quite a lot about the benefit and risks associated with their drugs — which can cost as much as a million dollars per patient per year, depending on weight.

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Gilead claims Tru­va­da patents in HHS’ com­plaint are in­valid

Back in November, the Department of Health and Human Services took the rare step of filing a complaint against Gilead for infringing on government-owned patents related to the HIV drug Truvada (emtricitabine/tenofovir disoproxil fumarate) for pre-exposure prophylaxis (PrEP).

But on Thursday, Gilead filed its own retort, making clear that it does not believe it has infringed on the Centers for Disease Control and Prevention’s (CDC) Truvada patents because they are invalid.

Roche's check­point play­er Tecen­triq flops in an­oth­er blad­der can­cer sub­set

Just weeks after Merck’s star checkpoint inhibitor Keytruda secured FDA approval for a subset of bladder cancer patients, Swiss competitor Roche’s Tecentriq has failed in a pivotal bladder cancer study.

The 809-patient trial — IMvigor010 — tested the PD-L1 drug in patients with muscle-invasive urothelial cancer (MIUC) who had undergone surgery, and were at high risk for recurrence.

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Stephen Hahn, AP

The FDA has de­val­ued the gold stan­dard on R&D. And that threat­ens every­one in drug de­vel­op­ment

Bioregnum Opinion Column by John Carroll

A few weeks ago, when Stephen Hahn was being lightly queried by Senators in his confirmation hearing as the new commissioner of the FDA, he made the usual vow to maintain the gold standard in drug development.

Neatly summarized, that standard requires the agency to sign off on clinical data — usually from two, well-controlled human studies — that prove a drug’s benefit outweighs any risks.

Over the last few years, biopharma has enjoyed an unprecedented loosening over just what it takes to clear that bar. Regulators are more willing to drop the second trial requirement ahead of an accelerated approval — particularly if they have an unmet medical need where patients are clamoring for a therapy.

That confirmatory trial the FDA demands can wait a few years. And most everyone in biopharma would tell you that’s the right thing for patients. They know its a tonic for everyone in the industry faced with pushing a drug through clinical development. And it’s helped inspire a global biotech boom.

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UP­DAT­ED: New play­ers are jump­ing in­to the scram­ble to de­vel­op a vac­cine as pan­dem­ic pan­ic spreads fast

When the CNN news crew in Wuhan caught wind of the Chinese government’s plan to quarantine the city of 11 million people, they made a run for one of the last trains out — their Atlanta colleagues urging them on. On the way to the train station, they were forced to skirt the local seafood market, where the coronavirus at the heart of a brewing outbreak may have taken root.

And they breathlessly reported every moment of the early morning dash.

In shuttering the city, triggering an exodus of masked residents who caught wind of the quarantine ahead of time, China signaled that they were prepared to take extreme actions to stop the spread of a virus that has claimed 17 lives, sickened many more and panicked people around the globe.

CNN helped illustrate how hard all that can be.

The early reaction in the biotech industry has been classic, with small-cap companies scrambling to headline efforts to step in fast. But there are also new players in the field with new tech that has been introduced since the last of a series of pandemic panics that could change the usual storylines. And they’re volunteering for a crash course in speeding up vaccine development — a field where overnight solutions have been impossible to prove.

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