What to expect from the rest of pharma's earnings
The third quarter so far has been largely a disappointment for pharma. Despite strong earnings from bellwether Johnson & Johnson, there has been a swath of earnings that have missed analysts' consensus expectations, as well as reports of restructurings.
The hits just kept rolling: The Medicines Company paired down staff in order to conserve cash as it pushes its PCSK9 inhibitor forward in a last-ditch effort to take on that market, while Celgene cut its guidance as key drugs underperform. Amgen finally accepted defeat and threw in the towel on development of its CETP inhibitor, ringing the final death knell for the class. And Gilead's investors sold off the stock as its hepatitis C franchise continues its decline.
Will the last few earnings calls bring similar disappointment? Here's our take on what you can expect:
Pfizer (October 30)
There will be a few things that investors of Pfizer want to hear about. Namely, how the strategic review of its consumer health business is going — but expect the big pharma to stay mum on that for now.
Pfizer will likely be pretty tight-lipped on its M&A strategy as well.
But expect to hear a positive update on the prospects for its checkpoint inhibitor Bavencio (avelumab) — the drug has two approvals so far and six other indications in development. Yet, Bavencio is only expected to be a small contributor in 2017 and won’t be a major contributor to revenue until at least 2020. Pfizer and partner Merck KGaA are late-comers to the space and will need a strong strategy to compete with market leaders like Merck & Co. and Bristol-Myers Squibb Co.
CDK 4/6 inhibitor Ibrance (palbociclib) is rapidly becoming the backbone for the company’s growth, but other players have been entering the space. While analysts will look for Pfizer to comment on the recent setback for Eli Lilly & Co.’s Verzenio (abemaciclib), don’t expect them to. Ibrance is estimated to bring in more than $3.4 billion in 2017, so a strong performance is anticipated in the third quarter.
Meanwhile, oncology drug Xtandi (enzalutamide) has been a disappointment. This puts extra pressure on Pfizer since the company paid $14 billion to pick it up in the Medivation acquisition in 2016.
Allergan (November 1)
Allergan plc made headlines in early September when it transferred all Orange Book-listed patents for Restasis (cyclosporine 0.05%) to the Saint Regis Mohawk Tribe. The company then exclusively licensed back rights to the blockbuster eye drug, with the logic being that, as a sovereign government, the tribe isn’t susceptible to inter partes reviews (IPRs).
The move was controversial to say the least. Some congressional leaders, including those on the House of Representatives' Committee on Oversight and Government Reform, harshly criticized Allergan, claiming the drugmaker was abusing patent laws and setting a dangerous precedent that could suppress market competition.
Perhaps most noteworthy among critics, though, was how the Saint Regis Mohawk Tribe deal seemed to contradict Allergan’s stance against pharmaceutical greed. CEO Brent Saunders in 2016 said his company would "not engage in price-gouging actions or predatory pricing," and pledged to only increase drug prices once a year at a rate less than 10%.
And yet, after all that hoopla, a federal judge just last week invalidated four Restasis patents. Expect Allergan, which counts on Restasis for about 9% of its net revenue, to explain its strategy for the drug moving forward.
On a lighter note, Allergan and Amgen Inc. recently received a thumbs up from U.S. regulators for Mvasi (bevacizumab-awwb), their biosimilar to Roche AG’s Avastin (bevacizumab). But given that legal battles have prevented most FDA-approved biosimilars from actually entering the market, the pair have an uphill battle.
Novo Nordisk (November 1)
As one of the big diabetes drugmakers, Novo Nordisk A/S’ primary challenge as of late has been dealing with an increasingly crowded therapeutic area.
Victoza (liraglutide), a glucagon-like peptide-1 (GLP-1) analog, is a crucial tool in that fight. The drug was head and shoulders above the rest of Novo’s portfolio during the first half of 2017, raking in DKK 11.5 billion (about $1.7 billion), an 18% increase from the same period a year ago. What’s more, an August FDA approval of Victoza as a treatment for reducing the risk of major cardiovascular events should prop up the drug’s revenues. Novo has launched an aggressive direct-to-consumer campaign to make sure that patients with type 2 diabetes know about the benefit.
In order to maintain the franchise, Novo is looking to launch a once-weekly GLP-1 as a follow-on to Victoza. Earlier this month, it snagged a 16-0 backing from an FDA advisory committee for semaglutide — and an official approval is likely to follow.
If OK'd, the drug could help offset the market share Victoza has been losing to Eli Lilly & Co.’s Trulicity (dulaglutide).
Expect analysts to inquire about the oral GLP-1 in development. Lilly already mentioned during its earnings call that they are eager to hear what Novo has to say on the matter.
Sanofi (November 2)
Approval of Dupixent (dupilumab) and Kevzara (sarilumab) earlier this year gave French drugmaker Sanofi SA an enviable pairing of commercial launches from which to build an immunology business.
Both are expected to become major earners for the company, boosting a specialty care business that now vies with diabetes as a contributor to overall revenue.
In the second quarter, Dupixent appeared to gain traction, although both it and Kevzara were still too close to initial commercialization to give a clear reading of market uptake. Sanofi’s third quarter update should offer more clarity on how physicians and patients view these new options.
A fast ramp up in immunology would also help distract from a diabetes portfolio battered by pricing pressure and competition in the U.S., which is Sanofi’s top market. In July, Sanofi said the U.S. diabetes sales decline would accelerate in the second half of the year. While growth from Toujeo (glargine) has taken some of the sting away, a bleak quarter could be in store for the diabetes unit.
Sanofi has also said it would give a comprehensive update on 2018 U.S. payer coverage along with third quarter results — a potential signal of what’s to come next year.
AstraZeneca (November 9)
In the nearly three months since the damaging failure of AstraZeneca's plc MYSTIC trial, shares in the British drugmaker have fully recovered from the 15% drop brought on by the clinical setback.
Commercial prospects for Imfinzi (durvalumab), the subject of the MYSTIC study, have been partially revitalized by strong data in an earlier lung cancer setting. And positive results for another drug, Tagrisso (osimertinib), could help the company carve out a leading position in patients with EGFR-mutated lung cancer.
But the positive news flow and stock market resurgence since MYSTIC can't disguise the fact that Imfinzi's top-end potential is curtailed — or at the bare minimum, delayed.
That will hurt AstraZeneca’s broader aims in immuno-oncology, even if Imfinzi can win leading positions in certain indications. Rivals Merck & Co and Bristol Myers-Squibb & Company have a major head start across a number of cancer types, and are advancing combinations to bolster their edge.
Investors will want answers on how the company thinks it can move forward in oncology despite the setbacks and competition. The window for CEO Pascal Soriot’s ambitious $45 billion revenue target by 2023 is closing fast.