Novartis' (NYSE:NVS) efforts to refocus investors away from its problem areas continued yesterday, with executives plugging its pipeline hopes and predicting a new growth phase from 2018. At an annual investor presentation the Swiss firm unveiled a table of 11 future blockbusters that it believes will drive this, though sellside forecasts suggest that a number still have much to prove (see table below).
A generous helping of hubris is of course to be expected at these events, though interestingly the company said it would be prioritizing bigger pipeline bets in the future - Glaxosmithkline's (NYSE:GSK) new chief executive hinted at a similar strategy recently. Perhaps big pharma chiefs are overcoming their fear of patent cliffs.
The loss of a huge blockbuster is painful for a company whose investors are exquisitely focused on quarterly earnings growth. The biologics revolution provided a neat solution to this, providing drugs that are unlikely to come to such an abrupt end, while another strategy has been to focus on smaller indications with unmet need. The explosion in rare disease research has taken this trend to its logical conclusion.
Former Glaxo chief Andrew Witty was famous for his attempts to move away from "white pills in western markets", and his diversification of the UK company kept investors happy for a while. But growth has stagnated recently, and his replacement, Emma Walmsley, has said she wants to see more focused pipeline investments and bigger launches.
With Novartis apparently also eschewing the "niche-buster", perhaps big pharma has concluded that huge products make more sense financially for an international company. A cynic might conclude that more zeros make it easier to capture the attention of investors.
Novartis highlighted the projects above as potential blockbusters in these specific indications. On the surface some look more achievable than others. Cosentyx, for example, has proven itself highly effective in psoriasis, and its CAR-T asset CTL019 could represent a huge treatment advance.
More controversial are its asthma projects - this space has come under huge pricing pressure - while Kisqali is considered one of the weaker cyclin inhibitors. With much data due next year on these assets, and several already on the market, their progress will be closely watched. Only time will tell whether investors prefer a failed blockbuster or a successful niche-buster.
Outside of the pipeline overview updates on the company's wider strategy included some notable comments. The generics arm Sandoz experienced intensifying pricing pressure in the US in the second quarter, though this unit is expected to launch five major biosimilars by 2020.
The review of the eyecare division Alcon is still to conclude by year end, executives confirmed. Most now expect a spin-off, and anything less could well disappoint.
In terms of M&A, any desire to make a large acquisition was dismissed, even in immuno-oncology; the company boasted of 18 second-generation agents in the pipeline. Intriguingly, considering that rumors that Tesaro (NASDAQ:TSRO) has put itself up for sale have just surfaced, executives did note that the lack of a Parp inhibitor was a gap in its oncology pipeline. Perhaps heading off the inevitable phone calls, they made clear that they consider valuations too high to justify a major deal in the space.
With a market value of $7.7bn, anyone making a move on the US biotech would have to make a convincing case for the price tag. It would be very surprising if Novartis executives had Tesaro in mind when they said they would be "prioritizing bigger bets".