Johnson & Johnson kicked off the third-quarter earnings season for the pharma industry with a bang yesterday, reporting strong growth from its drugs unit.
Restructurings and leadership changes have swept through the sector, leaving investors with questions on new directions and potential M&A.
Here's a quick look at what to watch for when companies announce earnings in the coming weeks:
Roche, October 20
As third to the checkpoint inhibitor game, Roche’s recently approved Tecentriq (atezolizumab) has received less attention than Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo.
Yet, Tecentriq launched strongly after an initial approval in bladder cancer and competitive data in non-small cell lung cancer presented at ESMO could set Roche up to steal share away in the coming quarters.
If Tecentriq is Roche’s future, the present is still very much defined by the performance of the Swiss company’s "big three" cancer drugs: Rituxan (rituximab), Herceptin (trastuzumab) and Avastin (bevacizumab). Revenues of each increased by mid-single digits last quarter and similar gains in Q3 would go far to keeping Roche on track to meet its target forecast of low- to mid-single digit revenue growth in 2016.
Merck, October 25
Fresh off Merck’s checkpoint inhibitor victory at ESMO, all eyes will be on Keytruda’s performance. Last quarter, Bristol-Myers Squibb’s Opdivo (nivolumab) racked up more than twice as many sales as Keytruda (pembrolizumab), leading many to hand Opdivo an early crown in the immno-oncology market.
Yet, detailed trial results released at ESMO showed Opdivo’s failure in first-line non-small cell lung cancer was worse than originally thought, leaving the door open for Keytruda to make up ground in the coming quarters.
A decision on approval for that indication is still to come, however, so Keytruda sales will likely still fall short of Opdivo’s in the third quarter.
Elsewhere, Merck hopes to see continued growth from its hepatitis C drug Zepatier (elbasvir/grazoprevir), which notched $162 million in sales through the first six months of 2016.
Continued low single-digit growth from the Januvia/Janumet (sitagliptin) franchise would help offset a likely significant loss of revenue from the antibiotic Cubicin (daptomycin), which lost patent protection in June.
Eli Lilly, October 25
Eli Lilly is in the midst of significant turnover. Veteran CEO John Lechleiter plans to step down at the end of the year, and will be replaced by David Ricks, current president of Lilly Bio-Medicines. Ricks will have some ambitious targets to meet, as the Indianapolis drugmaker has pledged to average annual revenue growth of 5% over the next five years.
In the short term, markets will be looking at revenue growth from Lilly’s six recently approved products, particularly the type 2 diabetes drug Trulicity (dulaglutide) and the cancer medicine Cyramza (ramucirumab).
Humalog, Cialis (tadalafil) and Alimta (pemetrexed) will still be the major breadwinners, although watch out for signs increased competition from checkpoint inhibitors is cutting further into Alimta revenues.
Novartis, October 25
In the second quarter, the Swiss pharma was hurt by loss of exclusivity for its blockbuster cancer drug Gleevec (imatinib), as well as higher competition for the eye drug Lucentis (ranibizumab). Net sales were flat and the company forecast flat to low single-digit declines in core operating income for the year.
Continued high growth from multiple sclerosis drug Gilenya (fingolimod) and newly approved Cosentyx (secukinumab) would help paint a rosier picture in Q3.
But, above all else, Novartis needs Entresto (sacubitril/valsartan) sales to pick up. Despite robust clinical data, sales have not materialized as expected. With sales of only $59 million through the first six months of the year, Entresto is still well short of its $200 million revenue target for 2016. Novartis has pumped money into a larger field force and building awareness in Q2 and Q3, so many will be looking to see if those efforts have paid off.
Also pay attention to any disclosures on Sandoz’ biosimilar pipeline. Last quarter, Novartis snuck an update on its biosimilar pegfilgrastim candidate into the release, disclosing it had received a complete response letter from the Food and Drug Administration.
GlaxoSmithKline, October 26
While Brexit could hurt GSK’s fortunes in the future, a weaker pound gave a boost to the British pharma’s reported Q2 earnings at actual exchange rates. As Brexit talk shifts to favor a hard break, the pound has fallen further and will likely be a tailwind for GSK again in Q3.
At constant exchange rates, however, growth will likely come from GSK’s HIV and vaccines portfolio. Revenues from the HIV drugs Triumeq and Tivicay grew strongly in Q2 and look set to increase, although declining sales of Advair (fluticasone/salmeterol) could offset those gains.
In pharmaceuticals, GSK is focused on its respiratory, HIV and vaccines products. But with Emma Walmsley, the current head of consumer healthcare, set to take over for CEO Andrew Witty in 2017, GSK’s performance in that sector could receive greater attention from markets.
Bristol-Myers Squibb, October 27
Bristol-Myers suffered a major setback when Opdivo failed to beat out chemotherapy in first line non-small cell lung cancer, crimping its future revenue potential and ceding ground to rival Merck. While Opdivo should continue to pull in sales on the back of its current indications, investors will want to hear about Bristol’s plans for moving forward.
While non-U.S. sales of Bristol's other immuno-oncology drug Yervoy (ipilimumab) collapsed in Q2, U.S. revenues saw solid growth on the back of combination approvals with Opdivo. Watch to see if scaled-back prospects for Opdivo weigh on revenues for Yervoy as well.
Outside of cancer, Bristol-Myers should be able to count on strong performance from its blood thinner Eliquis (apixaban), which is locked in competition with Johnson & Johnson’s Xarelto (rivaroxaban). But its hepatitis C drug Daklinza (daclatasvir), which surprised to the tune of $294 million in U.S. sales in Q2, may not fare so well. Bristol-Myers has said U.S. revenues would "significantly decline" in the second half due to lower demand.
Sanofi, October 28
Sanofi pushed hard in its attempt to acquire Medivation, taking its bid hostile before Pfizer eventually won the bidding war. Even now that the dust has settled, it is not clear where Sanofi plans to focus its M&A efforts next.
Challenges also loom in Sanofi’s lucrative diabetes franchise, as tighter prices in the U.S. and jockeying between the leading drugmakers hurt sales. And Eli Lilly will launch a biosimilar version of Lantus in December, introducing a new competitive threat to the blockbuster.
For Q3, eyes will be on Toujeo, Sanofi’s improved version of insulin glargine. The drug accounted for 6.1% of the U.S. basal market in Q2 and Sanofi will need that share to grow quickly to hold off Novo Nordisk’s Tresiba.
Quickening sales of the high cholesterol drug Praluent (alirocumab), which has had a slow start, would also help to boost confidence in the French drugmaker.
Pfizer, November 1
The third quarter was a busy stretch for Pfizer. The pharma giant beat out several other suitors to acquire Medivation for $14 billion at the end of August. A month later, Pfizer put aside its long-considered plans to split, opting to remain a unified company with separately managed divisions.
Expect some questions on how Pfizer’s plans will evolve now that it has decided to keep its branded and generic businesses under one roof. More details could also emerge on how Pfizer plans to overhaul its financial reporting for each unit.
Elsewhere, sales of the CDK4/6 inhibitor Ibrance (palbociclib) have grown dramatically in 2016. With competition from Novartis and Lilly looming on the horizon, continued revenue growth will be important to further establish market share.
AstraZeneca, November 10
Forty-five billion in annual sales by 2023 —a goal set by CEO Pascal Soriot while defending AstraZeneca from Pfizer — looks more and more daunting.
With Crestor (rosuvastatin) revenues falling off the patent cliff, AstraZeneca has aggressively pursued a strategy of out-licensing non-core assets, trimming its focus to several key therapeutic areas.
In the third quarter, the British pharma sold off rights to two dermatology drugs to Leo Pharma and its small molecule antibiotics portfolio to Pfizer. Together, the deals will bring in $665 million in upfront cash, plus as much as $2.25 billion in near-term and milestone payments. And AstraZeneca shows no signs of stopping, inking 4 out-licensing deals in the first week of Q4.
Bright spots in Q3 earnings could come from drugs like Brilinta (ticagrelor), Farxiga (dapagliflozin) and Tagrisso (osimertinib). Still, with the company guiding revenues at a low to mid single-digit decline for the year, the hope will be for externalization revenue to plug leaking sales while new drugs develop.