Welcome to "Sector Spotlight," where The Fly looks at a new industry every week and highlights its happenings.
PHARMA SECTOR NEWS: In 2024, drug makers lowered the cost of dozens of common medications to avoid penalties imposed by the American Rescue Plan, Katie Thomas of The New York Times reported. The decision to make the medications cheaper, such as certain insulin, has caused a severe financial hit to the clinics tasked by the federal government to care for the country's poorest citizens. These nonprofit clinics rely on an old federal program that requires drug companies to offer them steep discounts. Each time the company raised its price on the drug, the clinic would receive a steeper discount. Now, however, companies are penalized for raising the cost of the drug, leading to these clinics no longer receiving the same discounts.
Eli Lilly (LLY) announced that the FDA has approved Omvoh for the treatment of moderately to severely active Crohn's disease in adults. Omvoh is now approved in the U.S. for two types of inflammatory bowel disease, following its October 2023 approval as a treatment for moderately to severely active ulcerative colitis in adults.
Johnson & Johnson (JNJ) announced it has initiated the submission of an original new drug application with the FDA for TAR-200 for the treatment of patients with Bacillus Calmette-Guerin-unresponsive high-risk non-muscle-invasive bladder cancer with carcinoma in situ, with or without papillary tumors. This submission is being reviewed by the FDA through the Real-Time Oncology Review program, which allows the FDA to review data before the complete application is formally submitted and helps ensure treatments are available for patients as soon as possible.
In an interview on CNBC's Mad Money on Tuesday, Robert Davis said Merck's (MRK) current pipeline is the most diversified it has been in recent history. "We're not just a Keytruda company, we're an oncology company," he noted. HPV is an area where Merck continues to invest, and it's also focusing on the next generation of GLP-1's. Also on CNBC's Mad Money, CEO Len Schleifer said Regeneron (REGN) currently has 40 drugs in development representing billions in potential sales. "We know how to make and develop drugs for important conditions," he noted.
Bristol Myers (BMY) new psychiatric drug Cobenfy is effective in treating schizophrenia without "the serious side effects' of other older therapies, wrote Julie Coleman for CNBC. Bristol Myers CEO Chris Boerner noted, "Unfortunately, until Cobenfy, we did not have a fundamentally new mechanism of action to treat those patients...We get efficacy on par with the best of the existing atypicals, but we don't see the side effect profile that you see with those drugs," added the CEO, according to the CNBC story.
Pfizer (PFE) announced that it intends to sell approximately 700M ordinary shares in Haleon (HLN), representing approximately 7.7% of Haleon's issued share capital. "There will be no sale of any Ordinary Shares in the form of American depositary shares in Haleon," Pfizer noted in a notice to the London Stock Exchange.
Several large drugmakers will ask the Trump administration to pause Medicare drug price negotiations, even as Biden-appointed officials prepare a new list of medicines that should be targeted, Bloomberg's Madison Muller, Cynthia Koons, and Josh Wingrove reported. "They need to fix " before negotiating down the price of more drugs, Eli Lilly CEO Dave Ricks said on the sidelines of the JPMorgan Healthcare Conference. The IRA currently allows the U.S. government to pay lower prices on older drugs and the outgoing administration is planning to release a list of the next set of drugs eligible for negotiation before leaving office, a person familiar with the matter said. Novo Nordisk's (NVO) Ozempic and Wegovy are among those that are likely to be on the list of new government targets, according to the report.
Pfizer CEO Albert Bourla said the company's dispute with activist firm Starboard Value isn't "an aggressive situation," months after the investor disclosed a stake in the company and questioned his management, Damian Garde of Bloomberg wrote. "I don't underestimate anyone," Bourla said at the JPMorgan Healthcare Conference in San Francisco. "I respect Starboard, and I try to be engaged with them. If they have good ideas, we will do it." Bourla said Starboard recommended Pfizer make some changes "on the margins," but has not called for cost cuts, board changes, or a breakup of the company.
Eli Lilly expects that its experimental weight loss pill will get approved as soon as early next year, CEO David Ricks said in an interview with Bloomberg TV at the JPMorgan Healthcare Conference in San Francisco. The drugmaker expects data on the pill, called orforglipron, to arrive before the middle of 2025, which could lead to clearance in early 2026, Ricks said. A weight loss pill would offer more convenience to patients and would be easier to manufacture, he added.
AbCellera (ABCL) announced that it has expanded its existing collaboration with AbbVie (ABBV) to include the discovery of T-cell engagers in oncology. The expansion builds upon the successful partnership established in December 2022 and includes access to AbCellera's TCE platform to develop therapeutic antibodies for tumor targets. Under the terms of the agreement, AbCellera will lead discovery activities and AbbVie has the right to develop and commercialize therapeutic antibodies resulting from the collaboration. AbCellera will receive upfront and research payments and is eligible to receive downstream milestone payments as well as tiered royalty payments on net sales.
AbbVie and Simcere Zaiming, a subsidiary of Simcere Pharmaceutical Group, announced an option to license agreement to develop SIM0500, an investigational new drug candidate. SIM0500 is currently in Phase 1 clinical trials in patients with relapsed or refractory multiple myeloma, in both China and the U.S. Simcere Zaiming will receive an upfront payment from AbbVie and is eligible to receive option fees and milestone payments of up to $1.055B, as well as tiered royalties on net sales outside of the Greater China territory. AbbVie is eligible to receive tiered royalties on net sales in the Greater China territory.
Eli Lilly and Scorpion Therapeutics announced a definitive agreement for Lilly to acquire Scorpion's PI3Kalpha inhibitor program STX-478. STX-478 is a once-daily oral, mutant-selective PI3Kalpha inhibitor currently being evaluated in a Phase 1/2 clinical trial for breast cancer and other advanced solid tumors. Under the terms of the agreement, Lilly will acquire Scorpion and Scorpion shareholders could receive up to $2.5B in cash, inclusive of an upfront payment and subsequent payments upon achievement of certain regulatory and sales milestones. Additionally, as part of the transaction, Scorpion will spin out a new entity to hold its employees and non-PI3Kalpha pipeline assets. The new, independent company would be owned by Scorpion's current shareholders with Lilly holding a minority equity interest. The new company will be led by Dr. Friedman and members of the current Scorpion management team and will focus on discovering and delivering a portfolio of precision medicines to patients, accelerated by Scorpion's discovery capabilities and non-PI3Kalpha pipeline of medicines.
Regeneron reported preliminary Q4 Eylea HD U.S. net product sales of $305M ahead of presenting at the annual J.P. Morgan Healthcare Conference. Ahead of that presentation, Leonard Schleifer, board co-chair, president and CEO of Regeneron, stated: "The Regeneron name is synonymous with innovation, brought to life through proprietary technologies and world-class science that produce medicines that make a meaningful impact on patients' lives. Thanks to our long-term and consistent R&D investment, we have - in addition to our four blockbuster medicines - one of the industry's largest, most promising and most diverse clinical pipelines. Our therapeutic candidates tackle a myriad of diseases, with the most advanced programs addressing an aggregate commercial market opportunity expected to exceed $220B by 2030. We are well positioned for future growth and more confident than ever in the power of Regeneron's science." The company added: "On a combined basis, Eylea HD Injection 8 mg and Eylea Injection 2 mg remained the U.S. anti-VEGF category leader in 2024. Based on preliminary unaudited results, the products achieved 1% year-over-year growth by reaching $6B in aggregate U.S. net product sales for the year and $1.5B in aggregate U.S. net product sales for the fourth quarter of 2024, despite increasing competition. Eylea HD U.S. net product sales were $305M in the fourth quarter of 2024. EYLEA U.S. net product sales were $1.19 billion in the fourth quarter of 2024. Combined Eylea HD and Eylea U.S. net product sales for the fourth quarter of 2024 were favorably impacted by approximately $85M as a result of higher wholesaler inventory levels for Eylea, partially offset by lower wholesaler inventory levels for Eylea HD."
Oric Pharmaceuticals announced that the company has entered into a supply agreement with Janssen Research & Development to evaluate ORIC-114, a brain penetrant, orally bioavailable, irreversible EGFR/HER2 inhibitor, in combination with subcutaneous amivantamab, Johnson & Johnson's fully-human EGFR-MET bispecific antibody, for the first-line treatment of patients with advanced non-small cell lung cancer with EGFR exon 20 insertion mutations. Under the terms of the agreement, Oric will conduct and sponsor the trial and Johnson & Johnson will provide SC amivantamab. Oric maintains development and commercial rights to ORIC-114 and is free to expand the program in combination with other agents. Oric expects to initiate the combination Phase 1b trial to evaluate the safety and tolerability of ORIC-114 in combination with SC amivantamab for the first-line treatment of patients with advanced NSCLC with EGFR exon 20 insertion mutations in the first quarter of 2025.
Arsenal Biosciences announced that Bristol Myers Squibb has exercised its exclusive license option for ArsenalBio's AB-4000 series, the lead collaboration program generated under the multi-program agreement signed in December 2020. This milestone further strengthens the collaboration to advance next-generation T cell therapies for the treatment of solid tumors. "This milestone underscores the confidence Bristol Myers Squibb has in ArsenalBio's programmable T cell platform and our shared vision to develop transformative cell therapies for solid tumors," said Ken Drazan, ArsenalBio's chairman and CEO. "Our collaboration provides increasing opportunities to address the multifactorial challenge of treating solid tumors through programmable cell engineering. We look forward to continuing our work with Bristol Myers Squibb and progressing the AB-4000 series toward clinical development to potentially benefit patients with solid tumors."
Johnson & Johnson and Intra-Cellular Therapies (ITCI) announced that they have entered into a definitive agreement under which Johnson & Johnson will acquire all outstanding shares of Intra-Cellular Therapies for $132.00 per share in cash for a total equity value of approximately $14.6B. Under the terms of the agreement, Johnson & Johnson will acquire all outstanding shares of Intra-Cellular Therapies for a payment of $132.00 per share in cash. Johnson & Johnson expects to fund the transaction through a combination of cash on hand and debt. Johnson & Johnson expects to maintain a strong balance sheet and to continue to support its stated capital allocation priorities of R&D investment, competitive dividends, value-creating acquisitions, and strategic share repurchases. The closing of the transaction is expected to occur later this year subject to applicable regulatory approvals, approval by Intra-Cellular Therapies' stockholders and other customary closing conditions for a transaction of this type. Following completion of the transaction, Intra-Cellular Therapies' common stock will no longer be listed for trading on the Nasdaq Global Select Market. Johnson & Johnson will provide commentary on any potential impact to Adjusted Earnings Per Share from the transaction when it provides its initial full year 2025 guidance during the fourth quarter earnings call on Wednesday, January 22. Morgan Stanley downgraded Intra-Cellular to Equal Weight from Overweight with a price target of $132, up from $102. The firm's revised rating is based on the expectation that the deal goes through as announced.
Novartis (NVS) announced it "is pleased with the decision by the US Court of Appeals for the Federal Circuit, CAFC, that affirms the validity of the Entresto combination patent. We will work to appropriately enforce the combination patent through its pediatric exclusivity period expiring in July 2025. We will also continue to defend and protect all our important intellectual property and regulatory rights relating to Entresto." There are currently no generic versions of Entresto available in the US.
Regeneron Pharmaceuticals announced a strategic collaboration with Truveta and its collective of U.S. health systems to advance innovation and data-driven discovery across the life sciences, public health and healthcare delivery ecosystem. Regeneron will provide a strategic investment of $119.5M as part of Truveta's Series C financing round and collaborate with Truveta to launch the Truveta Genome Project.
Roche (RHHBY) announced that it has received 510(k) clearance from the FDA for its highly-sensitive in-situ hybridisation test, the Ventana Kappa and Lambda Dual ISH mRNA Probe Cocktail. The test is designed to help pathologists differentiate a B-cell malignancy from a normal, reactive response to an infection. This announcement follows the assay's CE Mark approval in June 2024.
Illumina (ILMN) announced a pilot proteomics program to analyze 50,000 UK Biobank samples in collaboration with deCODE Genetics, Standard BioTools (LAB), Tecan (TCHBF), GSK (GSK), Johnson & Johnson, and Novartis. The pilot program is based on Illumina's upcoming proteomics assay, Illumina Protein Prep, powered by SOMAmer technology, a next-generation sequencing based solution.
In a regulatory filing, AbbVie stated that it determined that it will record an impairment charge related to the emraclidine intangible asset acquired as part of the acquisition of Cerevel Therapeutics Holdings. "On November 11, 2024, AbbVie announced that its two Phase 2 EMPOWER trials investigating emraclidine as a once-daily, oral monotherapy treatment for adults with schizophrenia who are experiencing an acute exacerbation of psychotic symptoms, did not meet their primary endpoint of showing a statistically significant reduction (improvement) in the change from baseline in the Positive and Negative Syndrome Scale total score compared to the placebo group at week 6. Following the results of these trials, AbbVie began an evaluation of the emraclidine intangible asset for impairment which resulted in a significant decrease in the estimated future cash flows for the product. Based on the revised cash flows, the company estimates a non-cash after-tax intangible asset impairment charge of approximately $3.5 billion. AbbVie continues to evaluate information with respect to the Cerevel-related clinical development programs and will monitor the remaining intangible assets of approximately $3.6 billion," the company said.
Pfizer announced positive topline results from its pivotal Phase 3 CREST trial evaluating sasanlimab, an investigational anti-PD-1 monoclonal antibody, in combination with Bacillus Calmette-Guerin as induction therapy with or without maintenance in patients with BCG-naive, high-risk non-muscle invasive bladder cancer. The study met its primary endpoint of event-free survival by investigator assessment, demonstrating a clinically meaningful and statistically significant improvement with sasanlimab in combination with BCG as compared to BCG alone. The overall safety profile of sasanlimab in combination with BCG was generally consistent with the known profile of BCG and data reported from clinical trials with sasanlimab. The profile of sasanlimab was also generally consistent with the reported safety profile of PD-1 inhibitors. Results will be submitted for presentation at an upcoming medical congress. Pfizer plans to discuss these data with global health authorities to support potential regulatory filings. Sasanlimab also continues to be investigated in combination with Pfizer's antibody drug conjugate portfolio in advanced solid tumors.
H.C. Wainwright reiterated a Buy rating on CG Oncology (CGON) with a $75 price target. The firm believes the CREST study's impact on cretostimogene's overall near-term potential in bladder cancer should be minimal. Although the CREST study represents a significant milestone for the Bacillus Calmette-Guerin-naive population, its near-term impact on cretostimogene's position in the high-risk Bacillus Calmette-Guerin-unresponsive market will be limited, the analyst noted. The firm said this is primarily due to ongoing BCG shortages and hesitancy among community urologists to adopt immune-oncology therapies in this setting. H.C. Wainwright believes CG's cretostimogene's risk/reward profile as a monotherapy will continue to demonstrate a best-in-class profile, given its strong prior performance in the BOND-003 study.
Johnson & Johnson announced that on January 5, "out of an abundance of caution," Johnson & Johnson MedTech temporarily paused the U.S. External Evaluation and all U.S. Varipulse cases while it investigates the cause of four reported neurovascular events in the U.S. External Evaluation. "As the U.S. External Evaluation leveraged a unique platform configuration, there is no impact to commercial activity and Varipulse cases outside of the U.S.," the company said in a statement. Piper Sandler said Johnson & Johnson's confirmation that it has temporarily paused the domestic launch of its pulsed field ablation catheter Varipulse following four reported neurovascular events is "very good" for Boston Scientific (BSX) and also good for Medtronic (MDT). Piper is "not too surprised" by today's announcement, saying Varipulse's higher stroke risk was known. While how long the pause could last is unclear, it will likely be a while and even if Varipulse gets back on market, most clinicians will lean towards using Boston Scientific and Medtronic, the analyst tells investors in a research note. It thinks Boston Scientific would likely benefit more as the market leader, while Medtronic's "tailwind here will likely be a bit more muted."
Eli Lilly now expects worldwide revenue to be approximately $13.5B, representing growth of 45% compared to Q4 2023. Q4 consensus is $13.95B. This includes approximately $3.5B for Mounjaro and $1.9B for Zepbound. In addition to the uptake of Mounjaro and Zepbound, Lilly saw strong performance from its oncology, immunology and neuroscience medicines in Q4 of 2024. In total, non-incretin revenue grew by 20% compared to Q4 2023. However, the company's expected 2024 revenue is $400M, or about 3%, below the guidance range issued on October 30, 2024, as part of the Q3 2024 earnings call. Eli Lilly cut its FY24 revenue view to $45B from $45.4B-$46B, consensus $45.55B. "While the U.S. incretin market grew 45% compared to the same quarter last year, our previous guidance had anticipated even faster acceleration of growth for the quarter. That, in addition to lower-than-expected channel inventory at year-end, contributed to our Q4 results. We continued to make progress on our manufacturing build-out, and U.S. supply across all doses of tirzepatide was available throughout Q4," said David Ricks, Lilly chair and CEO. "The rest of our medicines performed within our expectations." JPMorgan said Eli Lilly's Q4 miss represents a buying opportunity as the company is positioned for strong growth in 2025. The company's 2025 sales guidance incorporates expectations for growth tailwinds from its expanded label and geographic footprint, sellable doses of incretins to increase at least 60% year-over-year in the first half, and no major changes in U.S. Zepbound pricing dynamics, the analyst tells investors in a research note. JPMorgan attributes the Q4 miss to lower-than-expected wholesaler volumes and inventory stocking as well as seasonality dynamics for Mounjaro. It kept an Overweight rating on Eli Lilly.
ADDITIONAL ANALYST COMMENTARY: After catching up with Pfizer's chairman and CEO, CFO, chief scientific officer and chief strategy and innovation officer at the firm's healthcare conference, JPMorgan views shares as inexpensive following recent weakness. However, this is balanced against modest top-line erosion over the next five years, said the analyst. While the firm sees several assets in the pipeline, particularly in oncology, that could make the story more interesting, it believes that further advancement and progress on these programs will be necessary to change the current narrative on shares, so it maintains a Neutral rating on Pfizer shares.
Berenberg decreased the firm's price target on Eli Lilly to $970 from $1,050 and maintained a Buy rating on the shares. The company provided a "robust defense" of its Q4 miss and provided some reasons to be optimistic about 2025, the analyst noted. However, Lilly's update, in addition to Novo Nordisk's disappointing CagriSema result, "have shaken investor confidence in the obesity market opportunity," contended the firm.
Leerink notes that Eli Lilly lowered its Q4 total revenue guidance by 5% but issued initial 2025 revenue guidance 2% above consensus. Q4 Mounjaro and Zepbound sales were approximately 18% and 15% below consensus, respectively. Although this is the second quarter in a row of disappointing results, the firm expects 2025-plus financial performance and pipeline news flow to be encouraging. Leerink kept its Outperform rating on the shares.
Citi lowered its price target on Regeneron to $795 from $895 and reaffirmed a Neutral rating on the shares after its Q4 pre-announcement. Ex-Eylea however, Citi states that it continues to be bullish on Regeneron's commercial products including Dupixent and Libtayo and remain excited with multiple upcoming catalysts.
Barclays said Eli Lilly agreeing to acquire Scorpion Therapeutics has a positive read-through to Relay Therapeutics (RLAY) given their similar competitive PI3Kalpha programs in breast cancer. Relay's RLY-2608 is ahead in clinical development and Scorpion's $2.5B acquisition value suggests upside in Relay shares, the analyst remarked. The firm has an Overweight rating on Relay with a $17 price target.
Oppenheimer cut the firm's price target on Regeneron to $950 from $1,000 and backed an Outperform rating on the shares. Shares have been under pressure ever since Amgen (AMGN) made its biosimilar Eylea aspirations known last September, and investors have been risk averse to the uncertainty surrounding Regeneron's founding franchise, especially with Eylea HD's ramp underperforming expectations, the analyst commented. Results from a prescriber survey suggest a floor could be near, with one-third of respondents expecting to prescribe moderate amounts of biosimilar Eylea over the next year, suggesting that branded Eylea could have a larger moat than expected.
Deutsche Bank upgraded Boston Scientific to Buy from Hold with a price target of $108, up from $87. Boston Scientific's story has become simpler" following Johnson & Johnson's Varipulse getting pulled from the shelves, the analyst told investors in a research note. The firm said that as one of the "best-in-class medtech names," Boston Scientific is poised again to outperform in 2025. For both short-term and long-term investors, the recent news about Varipulse "removes the major overhang" in 2025 and can allow Boston Scientific to continue to "grind higher throughout the year," contended Deutsche Bank.
Morgan Stanley upgraded Gilead (GILD) to Overweight from Equal Weight with a price target of $113, up from $87. The firm sees the potential for upward estimate revisions on lenacapavir forpre-exposure prophylaxis and further multiple expansion as the company makes progress with its next-gen HIV treatment strategy. The firm expects upward estimate revisions and further multiple expansion for Gilead. It sees "several key catalysts" for shares this year.