4Q Pharma Results Preview: J&J, Novartis, Bristol, Celgene, Biogen

J&J Mum For Now On Actelion, But M&A Expected As A Growth Driver

Little in the way of new information has surfaced in the month since Johnson & Johnson revealed it began exclusive negotiations with Actelion Pharmaceuticals Ltd., after the pulmonary arterial hypertension specialist’s acquisition talks with Sanofi broke down in mid-December. (Also see "Was Sanofi’s Offer One That Actelion Could Refuse? J&J Back At Bargaining Table" - Scrip, 22 Dec, 2016.)

J&J CEO Alex Gorsky didn't even discuss the possibility of buying Actelion during his talk at the J.P. Morgan Healthcare Conference on Jan. 9. But pursuit of Europe's largest biotech is expected to be a primary focus early in 2017 for the diversified health care giant, as a number of J&J pharmaceuticals face the potential for generic or biosimilar competition. (Also see "Actelion Could Succumb To Big Pharma's Charms" - Scrip, 28 Nov, 2016.)

In Jan. 5 note previewing the year ahead for J&J, Jefferies analyst Jeffrey Holford asserted that despite some bright spots, overall the pharma's pipeline potential was too small to drive the kind of growth shareholders would hope for. With cash totaling roughly $40bn, J&J has the ability to absorb an Actelion buyout, which might bring a price tag in the range of $30bn, he said.

One pipeline asset to watch, the analyst added, is esketamine, an intranasal formulation of the NMDA receptor antagonist ketamine, which should have a trio of Phase III trials in major depression report data during 2017. Jefferies pegs that program for peak sales of $3bn if the drug reaches market. Second-half approvals of immunology candidates sirukumab for rheumatoid arthritis and guselkumab for moderate to severe plaque psoriasis also could add to the bottom line, Holford said.

But a long list of products threatened by patent expiries undergird J&J's growth plans. "J&J is well managed and generally produces few surprises, though we are keen to hear management's updated view on generic/biosimilar exposure to Remicade, Prezista, Invega Sustenna, Risperdal Consta, Procrit and Concerta," Holford noted.

Novartis: Patent Expiries, Slow Entresto Launch, M&A Uncertainty Cloud Outlook

Patent expiries and pipeline progress will be top themes when Novartis AG releases its full-year results Jan. 25. The recently revamped Swiss company's long-term strategy is built on diversification, with pharmaceuticals focused on primary care and specialty medicines while Sandoz Inc. focuses on generic and biosimilar therapies, and the struggling Alcon unit keeps its eye on ophthalmology.

Novartis is also navigating the loss of exclusivity for its blockbuster oncologic Gleevec (imatinib) and faces fresh losses when Gilenya (fingolimod) goes generic in 2019, followed by Afinitor (everolimus) in 2020. This will be further aggravated by the patent loss by the end of the decade on two of the most important legacy GlaxoSmithKline PLC oncology drugs, Votrient (pazopanib) and Promacta (eltrombopag).

Meanwhile heart failure drug Entresto, viewed as the major growth driver of the pharma division, has had a slow launch and isn't coming on stream to offset loss revenue as quickly as many had thought. Entresto, which combines the neprilysin inhibitor sacubitril with the angiotensin receptor blocker valsartan, is one of 12 late-stage assets that Novartis is counting on for good future growth, with sales of $1bn each.

Analysts hope the company's update will herald faster adoption of Entresto in the US this year and await an update on the US situation regarding formulary positioning and access. Also sought will be clarification from management on M&A, following recent confusion about what the upper limits might be for a potential bolt-on. In October CEO Joe Jimenez tried to do that, saying the firm is looking at bolt-on acquisitions worth $2-5bn. (Also see "Novartis Chief: Good Things Come To Those Who Wait" - Scrip, 26 Oct, 2016.) But the rumor mill is hard to restrain and talks had grown in some quarter that Novartis might aim too high and over-reach itself.

For Bristol, All Eyes On Immuno-Oncology

Bristol-Myers Squibb Co. is sure to face pressure during its Jan. 26 full-year earnings call, following its Jan. 19 announcement that it will not pursue accelerated approval of its Yervoy/Opdivo combination in first-line lung cancer – which left more questions than answers for investors and analysts – and its announcement Jan. 20 that it has reached a settlement on PD-1 patent litigation with competitor Merck & Co. Inc.

The combination of the PD-1 inhibitor Opdivo (nivolumab) with the company's CTLA-4 inhibitor Yervoy (ipilimumab) is Bristol’s best remaining shot at the first-line lung cancer market, after Opdivo failed as a monotherapy in the indication in the CheckMate 026 study. (Also see "'Total Disaster' In First-Line Lung Cancer For BMS's Opdivo" - Scrip, 10 Oct, 2016.) Merck was able to swoop in with the first cancer immunotherapy clearance for first-line NSCLC with rival PD-1 inhibitor Keytruda (pembrolizumab), and FDA has already accepted a filing for Merck’s combination of Keytruda plus chemo in lung cancer, setting a user fee date of May 10. (Also see "Game Changer: Merck's Stealth Keytruda-Chemo Filing Stirs NSCLC Market Dynamics" - Scrip, 11 Jan, 2017.)

Bristol announced Jan. 19 that it will not seek accelerated approval for a filing of the Opdivo/Yervoy combination, contrary to prior guidance that the accelerated pathway was possible. In a brief statement, Bristol said the decision was based "on a review of data available at this time." As that essentially cedes the lead to Merck, analysts will been keen for further detail about this decision – including what data would have supported the filing, whether the company now has data in house that raise questions about efficacy, and more color on timing of interim data readouts.

Bristol has been extremely reliant on its position in immuno-oncology, and this will be the first quarter where that lead starts to chip away. On the other hand, it may allay some concerns that Bristol and partner Ono reached a settlement with Merck on all patent infringement litigation related to Keytruda. Bristol announced Jan. 20 that Merck will make an initial payment of $625m to Bristol and Ono, and pay ongoing royalties on global sales of Keytruda. The one-time payment will offset some of the losses, but the long-term effects will be what concern investors.

Celgene Gave Earnings Guidance At JPM, So Look For Data Updates

Celgene Corp. is one of the few big pharma and large biotech companies to provide financial guidance beyond the current calendar year, so when the Revlimid (lenalidomide) marketer presents its fourth quarter results and expectations for 2017 on Jan. 26, there should be no surprises on the earnings front. Instead, investors will continue to look for new data from late-stage clinical trials that could further diversify Celgene’s revenue beyond its blockbuster multiple myeloma franchise.

Celgene already reported during the J.P. Morgan Healthcare Conference on Jan. 9 that 2016 revenue will be in line with analyst consensus at about $11.2bn and 2017 revenue should total $13bn to $13.4bn – a boost from prior expectations of $12.7bn to $13bn for this year.

Key data in 2017 will come from Phase III clinical trials for Revlimid in follicular lymphoma and ozanimod in multiple sclerosis; the latter dataset is especially important to show whether Celgene’s 2015 acquisition of Receptos Inc. was worth the $7.2bn price paid for the firm’s selective sphingosine 1-phosphate (S1P) receptor modulator. Celgene said at the time that ozanimod could provide $4bn to $6bn in annual revenue, helping the company exceed its goal of $21bn in yearly sales by 2020. William Blair analyst John Sonnier also pointed out in a Jan. 9 note that Phase II results are expected this year for ozanimod, mongersen and Otezla (apremilast) in Crohn’s disease and ulcerative colitis. (Also see "Celgene diversifies with $7.2bn Receptos buy" - Scrip, 15 Jul, 2015.)

Investors and peers will also keep an eye out for news about mid-stage assets – both in-house and partnered programs – moving into Phase III or pivotal clinical trials. Such movements are expected this year for CC-122 in non-Hodgkin lymphoma (NHL), marizomib in glioblastoma, the chimeric antigen T-cell receptor (CAR-T) therapy bb2121 for multiple myeloma in partnership with bluebird bio Inc., the Juno Therapeutics Inc. CAR-T therapy JCAR017 for NHL, Otezla in scalp psoriasis and ankylosing spondylitis, and RPC-4046 in eosinophilic esophagitis.

Regulatory actions for Celgene in 2017 will include FDA and EMA decisions on Revlimid in multiple myeloma following autologous stem cell transplants and an FDA decision on the Agios Pharmaceuticals Inc.-partnered enasidenib (AG-221) in acute myeloid leukemia (AML) with an IDH2 mutation. Applications are expected to be submitted for a once-daily Otezla formulation and ozanimod in multiple sclerosis.

Evercore ISI analyst John Scotti pointed out in a Jan. 9 note that Celgene does not include most of its pipeline in its guidance for 2020 revenue and the company believes that it can achieve its longer-term earnings goals primarily through increased sales volume for its currently approved products.

Otezla, in particular, could be an important growth driver outside of hematology and oncology in 2017 and in the long term. Jefferies analyst Brian Abrahams said in a Jan. 9 note that Celgene sees increasing reimbursement for the product, which is a keystone in the company’s inflammation and immunology franchise. New programs with at least three payers will be announced in 2017 that are designed to expand access to the PDE4 inhibitor approved in the US for psoriatic arthritis and psoriasis. The company said at J.P. Morgan that it is focusing its pricing and reimbursement strategy on providing cost-saving innovation. (Also see "Pharma Strategizes On Drug Pricing On Day One Of J.P. Morgan" - Scrip, 10 Jan, 2017.)

What Will Biogen’s New CEO Have To Say?

Biogen Inc.’s fourth quarter sales and earnings call Jan. 26 will be the first financial call led by new CEO Michel Vounatsos. Investors will be anxious to hear his plans to drive the near-term growth, particularly when it comes to business development.

Biogen has a late-stage pipeline gap many investors would like to see filled, as sales of the multiple sclerosis pill Tecfidera (dimethyl fumarate) plateau. There was speculation Biogen might be a takeout target after CEO George Scangos announced plans to retire last year, but now that former Chief Commercial Officer Vounatsos has been installed, there’s an expectation that Biogen might be the one making a deal.

Beyond business development, Biogen will likely outline expectations for the launch of Spinraza (nusinersen) for the genetic rare disease spinal muscular atrophy. The drug was approved Dec. 23, and Biogen priced the drug beyond expectations – $750,000 for the first year of treatment, followed by $375,000 for subsequent years. (Also see "Biogen/Ionis’s Spinraza Approved; Second Antisense Drug For Neurodegeneration In 2016" - Scrip, 28 Dec, 2016.) What impact the high price might have on commercial expectations for the drug remains to be seen.