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

Brian Kaspar. AveXis via Twitter

AveX­is sci­en­tif­ic founder fires back at No­var­tis CEO Vas Narasimhan, 'cat­e­gor­i­cal­ly de­nies any wrong­do­ing'

Brian Kaspar’s head was among the first to roll at Novartis after company execs became aware of the fact that manipulated data had been included in its application for Zolgensma, now the world’s most expensive therapy.

But in his first public response, the scientific founder at AveXis — acquired by Novartis for $8.7 billion — is firing back. And he says that not only was he not involved in any wrongdoing, he’s ready to defend his name as needed.

I reached out to Brian Kaspar after Novartis put out word that he and his brother Allen had been axed in mid-May, two months after the company became aware of the allegations related to manipulated data. His response came back through his attorneys.

Endpoints News

Basic subscription required

Unlock this story instantly and join 57,500+ biopharma pros reading Endpoints daily — and it's free.

Novartis CEO Vas Narasimhan [via Bloomberg/Getty]

I’m not per­fect: No­var­tis chief Vas Narasimhan al­most apol­o­gizes in the wake of a new cri­sis

Vas Narasimhan has warily stepped up with what might pass as something close to a borderline apology for the latest scandal to engulf Novartis.

But he couldn’t quite get there.

Endpoints News

Basic subscription required

Unlock this story instantly and join 57,500+ biopharma pros reading Endpoints daily — and it's free.

FDA to Sarep­ta: Your wide­ly an­tic­i­pat­ed fol­lowup to Ex­ondys 51 is not get­ting an ac­cel­er­at­ed OK for Duchenne MD

In one of the least anticipated moves of the year, the FDA has rejected Sarepta’s application for an accelerated approval of its Duchenne MD drug golodirsen after fretting over safety issues.

In a statement that arrived after the bell on Monday, Sarepta explained the CRL, saying:

Endpoints News

Basic subscription required

Unlock this story instantly and join 57,500+ biopharma pros reading Endpoints daily — and it's free.

Levi Garraway. Broad Institute via Youtube

Roche raids Eli Lil­ly for its next chief med­ical of­fi­cer as San­dra Horn­ing plans to step down

We found out Monday morning where Levi Garraway was headed after he left Eli Lilly as head of oncology R&D a few days ago. Roche named Garraway as their new chief medical officer, replacing Sandra Horning, who they say is retiring from the company.

Endpoints News

Basic subscription required

Unlock this story instantly and join 57,500+ biopharma pros reading Endpoints daily — and it's free.

Af­ter a posse of Wall Street an­a­lysts pre­dict a like­ly new win for Sarep­ta, we're down to the wire on a crit­i­cal FDA de­ci­sion

As Bloomberg notes, most of the Wall Street analysts that cover Sarepta $SRPT are an upbeat bunch, ready to cheer on the team when it comes to their Duchenne MD drugs, or offer explanations when an odd setback occurs — as happened recently with a safety signal that was ‘erroneously’ reported last week.

Ritu Baral Cowen
Endpoints News

Basic subscription required

Unlock this story instantly and join 57,500+ biopharma pros reading Endpoints daily — and it's free.

UP­DAT­ED: No­var­tis spin­off Nabri­va fi­nal­ly scores its first an­tibi­ot­ic ap­proval

In May, Nabriva Therapeutics suffered a setback after the FDA rejected its antibiotic for complicated urinary tract infections — the Novartis spinoff has now had some better luck with the US agency, which on Monday approved its other drug for community-acquired bacterial pneumonia.

The drug, lefamulin, has been developed as an intravenous and oral formulation and been tested in two late-stage clinical trials. The semi-synthetic compound, whose dosing can be switched between the two formulations, is engineered to inhibit the synthesis of bacterial protein by binding to a part of the bacterial ribosome.

Saqib Islam. CheckRare via YouTube

Spring­Works seeks $115M to push Pfiz­er drugs across fin­ish line while Sat­suma sells mi­graine play in $86M IPO

SpringWorks and Satsuma — both biotech spinouts that have closed B rounds in April — are loading up with IPO cash to boost their respective late-stage plans.
SpringWorks

Bain-backed SpringWorks is the better-known company of the two, and it’s gunning for a larger windfall of $115 million to add to $228 million from previous financings. In the process, the Stamford, CT-based team is also drawing the curtains on the partnerships it has in mind for the pair of assets it had initially licensed from Pfizer.

Mi­nor­i­ty racial groups con­tin­ue to be dis­mal­ly rep­re­sent­ed in can­cer tri­als — study

Data reveal that different racial and ethnic groups — by nature and/or nurture — can respond differently in terms of pharmacokinetics, efficacy, or safety to therapeutics, but this disparity is not necessarily accounted for in clinical trials. A fresh analysis of the last decade of US cancer drug approvals suggests the trend continues, cementing previous research that suggests oncology trials are woefully under-representative of the racial makeup of the real world.

Van­da shares slide af­ter FDA spurns their big end­point and re­jects a pitch on jet lag re­lief

Back in the spring of last year, Vanda Pharmaceuticals $VNDA served up a hot stew of mixed data for a slate of endpoints related to what they called clear evidence that their melatonin sleep drug Hetlioz (tasimelteon) could help millions of travelers suffering from jet lag.

Never mind that they couldn’t get a planned 90 people in the study, settling for 25 instead; Vanda CEO Mihael H. Polymeropoulos said they were building on a body of data to prove it would help jet-lagged patients looking for added sleep benefits. And that, they added, would be worth a major upgrade from the agency as they sought to tackle a big market.