JPMorgan Day One Roundup - Deals And Guidance Abound

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Includes: AMGN, CELG, CLVS, EXEL, INCY, IPSEF, IPSEY, LOXO, MRK, NLNK, NVS, REGN, SNY, TEVA, TKPHF, TKPYY
by: EP Vantage

Day one of the JP Morgan conference delivered what many must have been hoping for: three deal announcements no doubt timed to grab the attention of the assembled masses. Still, there will be hopes for more news on the corporate transaction front in the coming days as the sector seeks to rediscover its mojo.

Elsewhere at the conference updates on the financial and commercial front abounded, and EP Vantage summarizes the most interesting below. As well as the deals from Takeda (OTCPK:TKPHF) (OTCPK:TKPYY), Ipsen (OTCPK:IPSEF) (OTCPK:IPSEY) and Amgen (NASDAQ:AMGN), these include an expanded collaboration from Incyte (NASDAQ:INCY), and an update of Celgene (NASDAQ:CELG), Regeneron (NASDAQ:REGN) and Teva's (NYSE:TEVA) financial futures.

The deals…

Takeda’s takeout of Ariad was covered in depth separately (Takeda pays 2012 price for 2017-model Ariad, January 9, 2017), as was Ipsen’s deal with Merrimack (Merrimack falls for $1bn oncology offer from Ipsen, January 9, 2017).

It is worth noting that these deals drove share prices in several other cancer-focused drug developers yesterday, including Exelixis (NASDAQ:EXEL) (+15%), Clovis (NASDAQ:CLVS) (+10%) and Loxo (NASDAQ:LOXO) (+8%). All of these are frequently named as potential targets for pipeline-hungry partners.

Amgen strikes early-stage T-cell discovery deal

Amgen is clearly determined to remain one of the riders in the immuno-oncology race, and has enlisted the help of Immatics Biotechnologies to do it. A research collaboration and license agreement was announced yesterday that will see the private German biotech’s T-cell receptor target discovery capabilities combined with Amgen’s bispecific antibody expertise to develop T-cell engaging bispecifics.

While much has been made of the $1bn biodollar price tag, the cash Immatics will actually see in its hand is $30m, with the rest coming from milestones and tiered royalty fees. This latest deal builds on Amgen’s 2015 collaboration on Xecor’s Xmab bispecific technology. It is also not the first deal Immatics has struck with big pharma: in 2013 the group signed a deal with Roche worth $17m up front.

Incyte benefits from Merck’s (NYSE:MRK) deeper commitment

This was not a new deal, but a notable expansion of an existing collaboration. News that Merck & Co will test a combination of Incyte’s IDO1 inhibitor epacadostat and Keytruda in four additional pivotal studies was enough to push shares in the biotech to 12-month highs. Plans are afoot to initiate pivotal trials this year in four tumor types including non-small cell lung, renal, bladder and head and neck cancers.

Leerink says this expansion will help address epacadostat’s commercial potential beyond melanoma – the Echo-301 Phase III trial of epacadostat and Keytruda in metastatic melanoma started in early in 2016. As well as confirming that it owns half of one the most advanced IO/IO combination strategies across the industry, Incyte also upped its peak Jakafi net revenue expectation – from $1.5bn to $2bn.

Incyte shares finished yesterday 9% higher – as an almost profitable biotech the company’s position as a takeover target is assured. Investors also spread the love helping shares in Newlink Genetics (NASDAQ:NLNK), which licensed its IDO project RG6078 to Roche in 2014, rise 18% to $13.12.

The guidance…

Regeneron comes out swinging

If anybody had some explaining to do to the market it was Regeneron after a US court’s imposition of a permanent injunction on sales of its cholesterol drug Praluent. Its chief executive, Leonard Schleifer, was vociferous in his attack on Amgen’s tactics, accusing the competitor of denying patients choice, although ultimately there was little he could say to reassure investors. The US biotech’s stock dropped 6% on Friday (Amgen in position to dictate terms in PCSK9 tussle, January 6, 2017).

He did emphasize that a stay of enforcement on the injunction was in place, and that Regeneron and its partner Sanofi (NYSE:SNY) would ask for that to remain while an appeal continues. He hinted that courts might agree that it would not be in the best interests of patients to take away a product that has helped them achieve reductions in low-density lipoprotein cholesterol as long as the legal case had yet to be resolved in the appeals courts.

Elsewhere, Regeneron confirmed that the sarilumab BLA would be resubmitted this quarter, and Mr. Schleifer hinted at an aggressive launch strategy. When asked how the company would make headway in a competitive market he said: “We’re going to have to think about pricing as a weapon.”

Teva hangs its head

Teva shares fell 8% on Friday when it lowered guidance for 2017, and the Israeli generics giant followed this with a presentation on Monday in which executives attempted to reassure investors that they could deliver the new numbers. Chief Executive Erez Vigodman said he was confident of delivering growth in Europe, though he refused to be drawn on whether the hit to guidance should be blamed on the delay to new products or a disappointing generics performance.

Mr. Vigodman stressed that Teva’s focus on products with a high barrier to approval should help profitability in the coming years, as should programs to create “operational efficiencies”. Completion of the sale of Actavis’ UK generics business to Accord for £603m ($733m), also announced yesterday, was part of that program, he said.

Celgene hints at rosier future

Celgene’s preliminary annual results and guidance are often a keystone event at this meeting, and the group gave investors more to think about than to act on – shares barely moved yesterday. Fourth-quarter sales of just under $3bn came in below analyst expectations, but with a boost to 2017 guidance – to $13.0-13.4bn from a high-end estimate of $12.7-13.0bn – the group’s executive team remains optimistic. Executives were keen to stress that volume gains, and not price rises, were driving performance, and would continue to do so.

The presentation was all about the company’s pipeline, however, and highlighted 11 clinical trial readouts and regulatory submissions for four assets – filings for ozanimod and enasidenib, and label expansions for Revlimid and Otezla – in 2017. Of its 14 assets in development, 10 have billion-dollar potential and four are multi-billion products, Celgene believes. With talk like that, people are going to expect a rise in its $21bn 2020 sales target, and in the breakout executives hinted as much.

Elsewhere...

Novartis' (NYSE:NVS) dream scenario?

Comments on biosimilar pricing from Novartis’ Chief Executive Joe Jimenez seemed to point to a softening in aggressive launches, although with so few biosimilars on the market perhaps these comments also provided an insight into the strategic thinking from one of the biggest players in this market.

Mr. Jimenez said most biosimilars had been launched at a 15% discount to the originator, with the discount growing to 50% as more competition emerged. That decline is slowing, he said, attributing this to a knock-on effect from pricing pressure in the US generics market, prompting manufacturers to make up sales and profits elsewhere.

Novartis plans to launch two biosimilars in Europe this year, to Enbrel and Rituxan, and should report more than $1bn in biosimilars sales for 2016. Mr. Jimenez forecast a more “rational” generics market in the future – again perhaps wishful thinking from the world’s second-biggest generics manufacturer.

Elsewhere, the chief exec bemoaned Novartis’ “underappreciated” pipeline, and said there was too much attention on its underperforming eye division, Alcon, which he insisted was on the road to a turnaround.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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