Biopharma is a complex, rapidly evolving industry that is highly regulated and closely watched — and that means there is constant news. Here's a closer look at the clinical trials, M&A, cool science and regulations that are driving the industry this week.
In case you missed it
- Trump talks drug pricing and right to try
- The FDA and real-world data conundrum
- What comes after CF for Vertex?
Mergers & analysis
The M&A bonanza continued with Sanofi SA striking its second deal in as many weeks. The French pharma further added to its blood disease offerings with the $4.8 billion takeout of Ablynx NV, after its pick-up of Bioverativ Inc. the week before.
Seattle Genetics Inc. jumped into the dealmaking fray with the $614 million buy of fellow Seattle biotech Cascadian Therapeutics, adding a third late-stage program to its arsenal of cancer drugs. Cascadian gives SeaGen a Phase 3 breast cancer program.
In an interesting turn of events, the biggest deal this week was made by parties outside the healthcare arena. Amazon, J.P. Morgan Chase and Berkshire Hathaway made headlines with their plan to ban together to lower healthcare costs for their employees. But the trio gave few details on exactly how they plan to do that and skepticism has run rampant.
I hate to say this because I want there to be something to bring healthcare costs down but the Amazon/Berkshire/JPM deal sounds to me like corporate pr bs.
— Maxim Jacobs, CFA (@MaxJacobsEdison) January 30, 2018
Revenue roll-call
The second week of fourth quarter earnings continued with heavyweights like Pfizer Inc., Eli Lilly & Co. and Roche AG reporting. While most of the major pharma companies reported better-than-expected earnings, the stock market didn't respond positively.
There are a number of factors playing into the reaction: 1) the recent changes to the tax code didn't bring down tax rates quite far enough, 2) pharma is spending its cash on share buybacks and not deals, and 3) earnings reports have largely been ho-hum.
For example, while the U.S. tax changes will bring down tax rates, Roche reported that its rate will go from 26.6% in 2017 to the "low twenties" in 2018. Meanwhile, Lilly says its 2018 rate will be 18% and Pfizer expects a new rate of about 17%. Investors were hoping to hear that tax rates were now below 10% — so far, AbbVie Inc. is the only company to deliver.
Pfizer has been telling investors for more than a year that uncertainty around the big tax cuts signed into law by President Trump was the main factor keeping the big pharma on the M&A sidelines.
With the statutory tax rate now slashed from 35 to 21 percent and that uncertainty vanished, investors were hoping for a deal announcement. Yet, CEO Ian Read still hedged, announcing plans to return about $13 billion total to share holders and invest a much smaller amount in employees and infrastructure.
Elsewhere, Vertex Pharmaceuticals talked about their dominance in the cystic fibrosis space, but failed to give investors much insight into what comes next for the big biotech. The company was once a leader in the hepatitis C space, but advances in science left Vertex struggling. The company then switched to cystic fibrosis and became a powerhouse, but investors always worry that Vertex could relive its mistakes if it doesn't diversify into other therapeutic areas.
Highly regulated
Bellicum Pharmaceutical Inc. revealed earlier this week that the Food and Drug Administration has put the company's lead drug candidate on clinical hold after three patients developed brain swelling, resulting in one of their deaths. The news brought the company's stock to an all-time low.
Elsewhere, the FDA slapped a black box warning on Intercept's chronic liver disease drug Ocaliva. While the regulatory action was largely expected due to previous warnings from both the company and the agency, investors were pleased to see that the FDA didn't recommend limiting the patient population.