BioSpace's List of Five Companies to Watch in 2015: Aegerion, AbbVie, Tekmira, Novartis AG, GlaxoSmithKline
January 27, 2015
By Riley McDermid and Mark Terry, BioSpace Breaking News Staff
It’s almost a month into 2015, and by most accounts, it hasn’t looked too different from 2014: The biotech sector is still booming, companies rushing to IPO are still queuing up to go public, and the race for Best Hair in Biopharma continues.
But beneath the surface change is begin to roil this sector—so to keep our readers ahead of the curve, BioSpace has put together a list of five companies that will probably change drastically in 2015, whether because dealmaking and restructuring are forcing change, or their wayward CEOs have been. Take a look and let us know what companies will see the most New Year, New You change in 2015.
1. AEGERION
Reuters has already reported that 10 unnamed shareholders have told Aegerion's board that because the company’s share price fell the most of any biotech last year, they want Beer replaced and a possible sale explored. The likelihood of that happening in 2015 is high, particularly because Beer himself has a litany of personal charges against his character pending.
Beer has publicly embarrassed Aegerion by being named in a long-running divorce and drug accusation saga involving boutique investment bank Jefferies and Co.; becoming the target of an unrelated U.S. Food and Drug Administration probe into whether or not he had misled investigators about cholesterol drug Juxtapid; and finally, landing himself in hot water with the U.S. Securities and Exchange Commission over "previously disclosed investigations by government authorities in Brazil into whether the company's activities in Brazil violated Brazilian anti-corruption laws."
Still, Aegerion is sticking to its guns, and reiterated Friday it wouldn’t comment one way or the other on the Reuters story—a sign the biotech may not necessarily be 100 percent behind its CEO, but is not ready to announce a transition in the C-level suite.
“We don't plan to comment on the article as it's our policy not to comment on rumors or speculation such as this," said Amanda Murphy, Aegerion's manager of investor and public relations, in an emailed statement to reporters.
2. ABBVIE
Express Scripts started the price war between dueling hepatitis C drugs in October when it said it would change its standard formula to a new, cheaper AbbVie treatment instead of choosing Gilead Sciences, Inc. ’s pricey Harvoni or Sovaldi drugs.
William Chase, executive vice president and CFO of AbbVie, also said that price war was not an issue because "our contracting strategy is not driven by targeting market share" in hepatitis C vaccine. Chase added that AbbVie is working diligently on having a once-a-day pill ready to deliver—and said the company will primarily be targeting partners who can control the pricing of HCV drugs.
AbbVie has already inked an exclusive deal to provide its hepatitis C treatment, dubbed Viekira Pak, to all hepatitis C patients covered by massive benefits provider Express Scripts’ plans, as opposed to just the most ill. Viekira Pak received approval from the U.S. Food and Drug Administration in October to treat hepatitis C genotype 1 after new data showed it had cure rates in the mid-90 percent range during clinical trials.
The money at stake is significant: AbbVie's said that its launch of its Viekira Pak has pushed its earnings per share up 30 percent in 2015, with adjusted EPS of between $4.25 and $4.45 per share. That blows the analyst consensus of full year 2014 estimate for EPS of $3.30 out of the water, agreed most market watchers this week.
Express Scripts CEO George Paz already took aim in J.P. Morgan at companies that charge sky-high rates for drugs that are essentially a cure, such as Gilead’s hepatitis drugs Harvoni and Sovaldi. Express Scripts has pointed out that many public health programs like Medicaid and state prison systems currently foot the bill for the $94,500 price tag of Sovaldi, which has a cure rate of around 90 percent.
"Everyone's got to make money, but how much?" famously said Paz.
3. TEKMIRA
Tekmira appears to be most interested in OnCore’s developmental NeuroVive drug candidate, NVP018, for the treatment of chronic HBV infection. The moneymaking potential of finding a possible “cure” for HPB the way Gilead has with its lucrative Harvoni and Sovaldi treatments for HCV looms large for Tekmira, who will be targeting the million people who have HBV.
Shares of Tekmira surged 40 percent on the news on the merger. That lift has been surprising to analysts, who have pointed out the deal will bring a 100 percent dilution of Tekmira’s stock value as required to consummate the 50/50 merger.
The deal is slated to close in the first half of 2015 and will boost Tekmira’s market cap from $300 million to $1 billion.
Treatments for HBV remain the key to that valuation, however. Most currently available therapies aim to suppress this infection but do not lead to a cure in the overwhelming majority of patients. As of now, NVP018 is referred to as OCB-030 in OnCore’s portfolio of product candidates, where OnCore has been testing the drug.
“I walk away with a very positive view of the merger as the synergies between the companies’ technology platforms increases the probability of their success in developing a clinically effective treatment for Hepatitis B and may also reduce the time to market of such a treatment,” said NeuroVive’s COO Jan Nilsson in a statement.
Another major issue? The increasingly crowded C-level suite for the newly combined company, which will have five OnCore people execs ruling the company jointly with four of Tekmira’s, including its CEO Mark Murray, who will stay on in that capacity. That will probably lead to a winnowing down of the executive ranks sometime in the near future, said analysts, though when and how that happens will be anybody’s guess.
Indeed, Gilead’s blockbuster HCV drug Sovaldi was originally developed by OnCore scientists when they were at Pharmasset, before Gilead snapped it up for $11 billion in 2011, note The Cantech Letter.
“For its part Tekmira brings its own HBV candidate to the proposed merger, TKM-HBV. Late in 2014 Tekmira announced Health Canada clearance to start a Phase I study with TKM-HBV. That would make TKM-HBV the most advanced HBV drug in new Tekmira’s 8 drug HBV pipeline,” wrote blogger Hogan Mullally.
“Clearly, TKM-HBV fits strategically in the new HBV focused company, but the fit for Tekmira’s pipeline of other RNAi based drugs is less clear,” said Mullally. “Assuming a successful merger, it wouldn’t come as a surprise to see the new Tekmira streamline its pipeline by divesting, or maybe discontinuing, certain RNAi projects/products.”
4. NOVARTIS
Some of the Humacao, Puerto Rico facilities’ manufacturing and packaging operations will be transferred to other companies, including Eli Lilly and Company . Others will be transferred to a Novartis facility in Lincoln, Neb.
“Novartis continually reviews its manufacturing infrastructure and capacity, including the number and size of its sites, to ensure we have the right production capacity in place to meet market demand, support our products and pipeline, and maximize productivity,” a Novartis spokesman said in a statement. “Novartis Consumer Health decided to close Humacao in a phased manner over time following such a review of manufacturing infrastructure and capacity.”
The Humacao plant produces Gas-X (simethicone) and Ex-Lax, and the packaging of Prevacid. These will be shifted to Lincoln. The Lincoln facility currently manufactures solid dose and powder forms of Excedrin and Theraflu. No additional jobs are expected to be added in Nebraska, which currently employs about 500 people.
The Puerto Rico facility also produces and packages animal health products, Sentinel, Interceptor and Milbemax. These will be shifted to Eli Lilly or France-based Virbac.
Novartis announced Jan. 12 that it had established a joint investment company with Qualcomm Ventures, the venture investment group of Qualcomm Incorporated. The joint agreement will have up to $100 million to support early stage companies.
“By working with Qualcomm Ventures, Novartis sees the opportunity to take a greater leadership role in introducing new mobile or digital technologies that have the potential to change the practice of medicine and bring more breakthroughs with real benefits to patients and society,” said David Epstein, division head of Novartis Pharmaceuticals in a statement. “We are excited by the potential of digital medicines to further enhance our mission of the right drug for the right patients at the right time helping people live longer with a better quality of life giving more time to do the things that matter to them.”
Novartis is also concluding a joint venture agreement with U.K.-based GlaxoSmithKline that would give GSK 63.5 percent ownership of Novartis’ over-the-counter drug business, as well as management of its facilities, including the manufacturing plant in Nebraska. The deal is planned for completion in the first half of 2015.
Also in April, Novartis and GSK agreed to develop a new consumer health business. Novartis acquired GSK’s oncology product lines for $14.5 billion, as well as an additional $1.5 billion dependent on meeting developmental milestones. GSK will pay $7.1 billion in royalties for Novartis’s vaccines business, except the flu component of the vaccines division.
The deals are all part of what Novartis CEO Joe Jiminez described in a Reuters article as making the company “fighting fit” to deal with the next decade of changes and challenges in the worldwide healthcare market. Although the various deal would decrease overall sales by about $4 billion, profits would be higher because the oncology market has a higher margin than the vaccines business.
The deals also moved GSK out of the cancer drug market, where the company CEO Andrew Witty indicated they did not have the size and scale to compete. GSK’s two core business are vaccines and consumer health, so those deals strengthened the company’s business in both areas.
5.GLAXOSMITHKLINE
Chief Executive Andrew Witty also told Reuters that after a rough year during which Glaxo was fined $500 million for bribing Chinese authorities, the company is not looking for any deals with a huge price tag, though smaller acquisitions would not be out of the question.
"Future M&A in the consumer space could get quite interesting again," he said.
As for IPOs, Witty said that in particular, Glaxo’s consumer health business would be an ideal spinout operation. That unit is in the middle of finishing up a $20 billion asset swap with Novartis that must still receive stamps of approval from regulators—but could bring in a raft of new assets.
"Post-Novartis, particularly if we did more transactions in the consumer space, the idea of the consumer company being a standalone consumer powerhouse is much more tenable," Witty said.
But with the deal slated to close by the second quarter of 2015, Witty said Glaxo would probably hold off on any potential spinoff IPOs until the deal is officially done and dusted.
"It is pretty unlikely anything substantial can happen until after that point, so this is all very much in the world of strategic theory rather than tomorrow morning's press release," Witty said.
Glaxo already has a template in place for how a successful in-house IPO might go; it is currently planning the public market debuts of its HIV unit, ViiV Healthcare, which it announced in October.
All of these measures are ways for Witty to reassure shareholders that after a brutal 2014, Britain’s largest drugmaker is on track to return some value to the company via streamlining, acquisitions and a fleet of new drugs set to hit the market in 2015. As part of that effort, Glaxo will be cutting $1.5 billion in costs across its business model, while new chairman Philip Hampton is scheduled to take the helm in September.
“Glaxo currently has 129 distinct pharmaceutical research milestones pending in 2015, ranging from first-in-man tests of new drugs to numerous clinical trial results to potential regulatory approvals,” said Reuters. Among those are the closely watched (and lucrative) vaccine candidates, which could eventually include products from the Novartis disease, such as a treatment for meningitis.