The giant Swiss multinational healthcare company Novartis (NVS) has seen its stock rise almost 25% YTD, and while it will lose revenue due to patent expiration on three of its most profitable drugs, including Glivec, Zometa and Diovan - new drugs working through the pipeline should make up for much of the lost revenue. The company has been gearing up its pharmaceutical division for a new growth phase, driven by "an expanding blockbuster portfolio and an industry-leading pipeline." The company plans to submit upwards of twenty filings to the FDA over the next 24 months and is expecting about 15 approvals.
What I find most promising about Novartis' pipeline is the company expanding its portfolio specifically in oncology. Sales of cancer drugs were expected to nearly double compared to the rest of the global pharmaceutical market, and by 2012 was expected to reach over $80 billion. And two of Novartis' novel cancer drugs in trials made news this past week.
POSITIVE RESULTS FOR NOVEL MULTIPLE MYELOMA DRUG PANOBINOSTAT
The first announcement was that its experimental multiple myeloma (MM) cancer drug LBH589 (panobinostat) met its primary phase III goal significantly extending the lives of MM patients. Though full results from the PANORAMA-1 phase III study are still being evaluated the study found that LBH589 combined with bortezomib, Takeda Pharmaceuticals and Johnson & Johnson's (JNJ) MM treatment, along with the anti-inflammatory dexamethasone, LBH589 significantly extended the lives of patients who have previously relapsed compared to those taking bortezomib and dexamethasone alone.
Full results of the findings will be presented at an upcoming medical congress and presented to regulatory authorities worldwide. LBH589 is a pandeacetylase (pan-DAC) inhibitor that works by blocking a set of key cancer cell enzymes which leads to cellular stress and death to these cells. LBH589 has the potential to be the first in its class of anticancer agents available to patients with MM.
The MM drug market is forecast to climb 60% by 2021, rising from $4.4 billion to $7 billion. There are an estimated 21,700 cases of MM annually, mostly in older adults. 10,710 deaths occur annually due to MM, and have a 5-year survival rate of 44%. MM begins in bone marrow plasma cells and disrupts the production of normal blood cells.
While Novartis' drug is promising, and could be a blockbuster when used in combination with other MM drugs, it will have to compete with Celgene's (CELG) Pomalyst, a new oral treatment for MM patients that have resisted two or more prior treatments. Pomalyst received Food and Drug Administration (FDA) approval earlier this February based on a 221-patient clinical trial where 7.4% of patients on Pomalyst alone had their MM at least partially wiped out.
The drug joins a growing portfolio of cancer meds from Celgene, including its flagship MM product Revlimid which saw sales of $3.8 billion in 2012, and is forecasted to have 64% share of the total MM market in 2021 due to increased penetration as the first-line of defense while also being used in combination with emerging therapies across all lines of treatment. A number of analysts have forecast Pomalyst sales to reach $1.1 billion in 2017.
NOVARTIS'S LICENSED GENE THERAPY SHOWS UNPRECEDENTED SUCCESS IN EARLY STAGE TESTS
Gene therapy is a budding industry in the treatment of cancers, and judging from the results of an early study consisting of six research groups and over 120 patients with various of blood and bone marrow cancers, Novartis' licensed novel gene therapy may represent a big advancement in treating leukemia and other blood related cancers. The gene therapy involves removing millions of a patient's T-cells and altering them in a lab to target the cancer, then infusing the T-cells back into the patient.
The results have been stunning. In an acute lymphocytic leukemia study consisting of 27 patients who were gravely ill and out of options, all 5 adults and 19 of the 22 children found their cancer in complete remission, though there have been a few relapses since. Several of the patients only required a one-time treatment, which was administered several years ago, and remain cancer free to this day.
Following a University of Pennsylvania research team's breakthrough results on chimeric antigen receptor technology, Novartis acquired the rights with an August 2012 licensing agreement. Novartis will work with Penn to further study and commercialize novel cellular immunotherapies using chimeric antigen receptor technology. Novartis and Penn will build a first-of-its-kind Center for Advanced Cellular Therapies (OTCQB:CACT) in Philadelphia, devoted to the discovery, development and manufacturing of adoptive T cell immunotherapies through a joint research and development program led by scientists and clinicians from Penn, Novartis, and the Novartis Institutes for Biomedical Research. Under the agreement Novartis gained an exclusive worldwide license to the technologies used in an ongoing trial of patients with chronic lymphocytic leukemia and future chimeric antigen receptor (CAR) based therapies developed through the collaboration. Penn will receive milestone and royalty payments as part of the agreement.
Dr. David Porter who led the University of Pennsylvania study, which treated 59 patients, found that of the first 14 patients with chronic lymphocytic leukemia, four had complete remissions, four had partial remission and the rest did not respond. Interestingly, some that had partial responses continue to see their cancer shrink a year after treatment. "That's very unique to this kind of therapy and gives hope the treatment may still purge the cancer. Another 18 CLL patients were treated and half have responded so far." Dr. Porter further explained, "What we are giving essentially is a living drug" - permanently altered cells that multiply in the body into an army to fight the cancer."
There are roughly 49,000 new cases of leukemia, 70,000 cases of non-Hodgkin lymphoma diagnosed in the United States annually. And while many patients are successfully treated with chemotherapy or bone marrow or stem cell transplants, gene therapy can have advantages, not only is the treatment less costly, but there no need for a bone marrow or stem cells transplants.
NOVARTIS NEW CHAIRMAN FOCUSES ON RAISING RETURNS TO INVESTORS
Novartis is a giant in the industry. It has a market cap of just under $190 billion. Its stock closed on Monday December 9th just shy of its 52 week high closing at $78.37 per share. And while the stock may seem a bit pricey the company has reduced debt and is now focusing on delivering a higher return to its shareholders with strong dividends and a productivity agenda that could deliver gains of 3-4% of sales annually through 2015.
The company also announced last month it intends to buy back $5 billion of its stock over the next two years. The buyback should raise investor confidence that the new Chairman, Jörg Reinhardt, sees value in the stock and continues his review focusing on the company's operations in an effort to bolster investor profits. Mr. Reinhardt will be more focused on providing a return to shareholders than the previous Chairman Daniel Vasella. The buyback was part of an $11 billion plan announced in 2008, of which more than three-quarters still remains.
In other moves that the company has made or is making, earlier last month it sold off its blood transfusion testing unit to Spain's Grifols for $1.68 billion. And with regards to its animal healthcare subsidiary Novartis has been shopping its animal healthcare subsidiary, opening its books to giants like Bayer, Ely Lilly and other rivals. However, rumors have spread that the company may be passing up the possible $4.1 billion in cash sale, and is looking into swapping its animal healthcare division with Merck's (MRK) over the counter drug business.
While Novartis is not at a bargain price, it is a powerhouse in the healthcare field and a safe place for investors who are looking for stable growth and dividend income. I do like that the company is focusing more of its efforts on raising the value of the stock for its investors, which could speed up the growth of the company. For the future Novartis' solid pipeline should offset its revenue losses due to generic competition, and is an excellent stock to accumulate and have in a long-term portfolio.