Pharma Q1 Results Preview: Lilly, Biogen, Amgen, GSK & Roche
Executive Summary
Investors await news from Lilly on whether it will use repatriated cash for M&A; from Biogen on its Spinraza and gene therapy strategies in light of Novartis' AveXis deal; and from Amgen on pipeline programs and acquisitions as major products face new competition. Immuno-oncology combination updates are anticipated from Roche, plus guidance on how GSK will cope with Advair generics, HIV competition from Gilead and the cost of new drug launches is expected.
Customary early reporters Johnson & Johnson and Novartis having already revealed their latest financials, Scrip takes a look at the big pharma companies that are next up to announce their first-quarter results.
Lilly Might Be More Inclined Toward M&A Due To US Tax Changes
Lilly Research Laboratories , which reports its first-quarter results on April 24, typically has sat out the large-scale M&A pursued by other big pharma brethren such as Pfizer Inc., [C#198600186:Merck & Co. Inc.] and Roche, but its possible desire to offload animal health unit Elanco combined with about $9bn it could repatriate in off-shore earnings under last year's tax reform might lead the Indianapolis firm to be more aggressive in the acquisition field this year.
"Elanco had a poor year in 2017 declining 2% to $3.1bn," PharmaVitae analyst Oliver Spray told Scrip. "Investors will be eager to learn whether Lilly plans to divest the business and refocus its efforts in pharmaceuticals. A divestment of Elanco plus any repatriated cash will provide Lilly the financial firepower to pursue M&A or in-licensing deals of up to $10bn. A deal of this kind will help the company alleviate some of the external pressures it is experiencing, especially in areas such as diabetes."
Beyond diabetes, Lilly might look to deal-making to bolster its pipeline and portfolio in inflammation and immunology or central nervous system therapies, he added. (Also see "Pharma Q4 Results Preview: Pfizer, Merck, Roche, Amgen, Novo, Lilly, AstraZeneca" - Scrip, 26 Jan, 2018.) Late last year, Lilly cut its workforce by 3,500 and said it might sell Elanco or look to spin out the unit through an initial public offering to help offset the impact of competitive pressures. (Also see "Lilly Math: Subtracting Employees And Animal Health Equals Pharma Growth" - Scrip, 24 Oct, 2017.)
Investors will be curious to hear about Lilly's M&A plans during its earnings call, as well as how it views the diabetes space and its once-weekly Trulicity (dulaglutide) in light of competition from Novo Nordisk AS's Ozempic (semaglutide) as well as the threat of an oral GLP-1 agonist in late-stage development at the Danish specialty firm. (Also see "Novo Nordisk Already Plans A 'Next Generation' Oral Semaglutide - CEO" - Scrip, 8 Mar, 2018.) Ozempic obtained US approval last December, followed by European approval in February. (Also see "Novo Nordisk To Target 'New GLP-1 Patients Only' With Weekly Ozempic " - Scrip, 25 Feb, 2018.)
"Ozempic has established cardiovascular data from clinical trials, along with superior efficacy compared to Trulicity, meaning it will take a significant portion of Trulicity’s market share," predicted Spray. "PharmaVitae anticipates investors will want hear whether the launch of Ozempic has negatively impacted Trulicity’s commercial prospects in terms of pricing or payer reimbursement."
The European launch of Olumiant (baricitinib) and anticipated US approval for that agent in June also should be a focus of the call. Lilly resubmitted its US NDA for the rheumatoid arthritis drug in February, with additional safety data. (Also see "Lilly's Olumiant Resubmission Includes Safety Data From US FDA's Sentinel Network" - Pink Sheet, 22 Feb, 2018.) FDA's Arthritis Advisory Committee will review the filing on April 23, and an approval decision is expected in June.
Investors also will be interested to hear a commercial update for interleukin-17A inhibitor Taltz (ixekizumab), which is trying to compete against Novartis AG's Cosentyx (seckukinumab) despite the latter's first-to-market advantage. (Also see "Positive Spondylitis Phase III Brings Lilly's Taltz Closer To Cosentyx's Label" - Scrip, 13 Feb, 2018.) With Taltz already approved in the US to treat moderate-to-severe psoriasis and psoriatic arthritis, Lilly now is working to add an ankylosing spondylitis indication to the product's label. In light of Novartis reporting disappointing first-quarter figures for Cosentyx, Taltz's performance will also be closely analyzed for signs that increasing competition in the space is starting to bite.
For Biogen, SMA Gene Therapy Likely To Be A Focus
Biogen Inc. investors will be eager for an update on the company's plans to protect its rising star franchise Spinraza (nusinersen) now that a big pharma rival has stepped into the spinal muscular atrophy (SMA) therapy area with a potential gene therapy. Novartis AG announced plans to buy the gene therapy developer AveXis Inc. earlier in April for $8.7bn, leaving some Biogen investors wondering why Biogen didn't jump on the deal instead.
Now Biogen will likely have to answer to investors during the first-quarter call April 24 because AveXis is developing a gene therapy for SMA, which could be a potential one-time cure for the inherited rare disease. (Also see "Biogen's SMA Ambitions Run Up Against A New Deep-Pocketed Rival" - Scrip, 9 Apr, 2018.) Investors will also weigh in on whether Biogen made the right M&A move in signing another alliance with Ionis Pharmaceuticals Inc., building on years of partnership that produced Spinraza. (Also see "Biogen Re-Ups With Ionis In Search Of A Neuroscience 'Innovation Engine'" - Scrip, 20 Apr, 2018.)
Spinraza is one of Biogen's clear near-term growth drivers, generating $884m in 2017, its first year on the market, and more than most investors anticipated. Now they want to make sure Biogen is doing everything it can to protect the budding franchise. Management will most likely need to provide an update on Biogen's own gene therapy program, which is expected to enter the clinic in mid-2018, though the company hasn't otherwise released much in the way of details about it. And it may have to answer questions about why it didn't make a play for AveXis, given that the timeline for its gene therapy is much further ahead – with a filing expected later this year.
Amgen: Out With The Old, In With The New?
Amgen Inc. has been challenged during the last few quarters to keep revenues rising for both mature and new products, so investors will seek reassurances during the company's first-quarter earnings call on April 24 about its key products, its pipeline programs and efforts to bring in new assets.
Amgen's blockbuster TNF inhibitor Enbrel (etanercept) has faced a major increase in competition for arthritis and other patients as well as a rise in pricing pressure from payers. (Also see "Amgen’s Biggest Seller Enbrel Hit By Pricing Pressures, Competition" - Scrip, 28 Oct, 2016.) At the same time, the blockbuster hopeful Repatha (evolocumab), a PCSK9 inhibitor for reducing high cholesterol, has struggled to meet high expectations even with an updated label noting cardiovascular benefits. (Also see "Amgen Hit By Enbrel 'Peculiarities' And Repatha Resistance" - Scrip, 27 Apr, 2017.)
However, the first quarter of 2018 was the first full quarter in which Amgen could promote Repatha's cardiovascular benefits in the US under a label update that received US FDA approval in December. (Also see "Outcomes Claim May Help Amgen Make Case For PCSK9 Inhibitor Repatha" - Scrip, 1 Dec, 2017.) Also, the company may have a new therapy approved in the US within the next few weeks that's also seen as a potential blockbuster – the migraine-preventing injection Aimovig (erenumab), a CGRP inhibitor. (Also see "Erenumab Moves Ahead In Treatment-Refractory Migraine in Novartis/Amgen LIBERTY Study" - Scrip, 23 Jan, 2018.)
Aimovig, which is being developed and commercialized under an agreement with Novartis AG, has a May 17 PDUFA date and the biologic is moving closer to approval in the EU. (Also see "EU CHMP Finalizes Outstanding Issues On Aimovig And Symproic" - Pink Sheet, 22 Feb, 2018.) Investors will be curious about Amgen's marketing plans for the US and its negotiations with payers, especially in light of a recent Institute for Clinical and Economic Review (ICER) that suggested CGRP inhibitors may not be worth the cost for some migraine sufferers. (Also see "New Migraine Drugs May Not Be Cost Effective In Patients With Other Options, ICER Suggests" - Pink Sheet, 15 Apr, 2018.)
With the commercial prospects for two high-profile new products on somewhat shaky ground, Amgen is under pressure to develop additional novel therapies and bring in even more new products. CEO Bob Bradway said during the company's fourth-quarter call on Feb. 1 that Amgen would use its new cash from tax reform savings "to invest in our people and the attractive long-term growth opportunities we see in our industry, including M&A where it fits our focus," as well as stock repurchases. (Also see "Amgen Invests In Deals, Share Buybacks And Manufacturing As Sales Dip" - Scrip, 1 Feb, 2018.)
Amgen's financial footing is expected to be fairly stable for the first quarter with analyst consensus of $5.4bn in revenue versus $5.5bn for the same period in 2017, despite generic and other competition for key products in 2018.
Mizuho Securities analyst Salim Sayed said in an April 19 earnings preview note that first-quarter Enbrel sales should be in line with consensus estimates of $1.1bn, representing a 23% sequential drop from the fourth quarter of 2017, or roughly on par with the first-quarter 2017 sequential drop of 29% (15% year-over-year). (Also see "Amgen Hit By Enbrel 'Peculiarities' And Repatha Resistance" - Scrip, 27 Apr, 2017.)
Jefferies analysts were less optimistic about Enbrel sales in an earnings preview issued on April 6, which estimated first-quarter sales at $850m to $900m based on prescription-tracking figures from IMS Health.
The Jefferies report also noted ongoing patent litigation and pending settlements with generic drug makers for the neutropenia blockbuster Neulasta (pegfilgrastim) and the secondary hyperparathyroidism therapy Sensipar (cinacalcet). (Also see "Mylan Poised To Launch Its First US Biosimilar, With A Stacked Pipeline Behind It" - Scrip, 12 Apr, 2018.) However, Amgen is trying to convert patients on Sensipar to its newer therapy Parsabiv (etelcalcetide) before generics hit the market, which Jefferies estimated would wipe out $400-500m in 2018 revenue if Sensipar generics hit in the first half of 2018. (Also see "Parsabiv Could Allow Amgen To Maintain Control Of Calcimimetics Market" - Scrip, 20 Feb, 2017.)
GSK: Eyes On Walmsley
GlaxoSmithKline PLC has had an eventful first quarter, and investors are keen to learn more about CEO Emma Walmsley's plans for reviving the UK's biggest drug maker when she updates on business performance on April 25.
Market sentiment for the group has been sagging recently, with some analysts predicting GSK's earnings per share (EPS) will come under pressure from generic competition later this year to its asthma blockbuster Advair (fluticasone/salmeterol), from HIV competition from Gilead Sciences Inc., and costly investment from new launches. Analysts at Bernstein say no real EPS growth is expected in 2018, 2019 or 2020, but that earnings per share could begin to rebound after that.
Still, one worry that had clouded the company's dividend prospects was removed in late March when Walmsley said she would not be bidding to buy Pfizer's consumer health unit. (Also see "GSK Drops Out Of Auction For Pfizer's Consumer Health Unit" - Scrip, 23 Mar, 2018.)
Datamonitor Healthcare analyst Oliver Spray says investors will be looking for GSK’s updated estimations on the date of Advair generics entry. Previously, GSK has offered two options for Advair entry dates either in mid-2018 or in 2019. Following a recent failure by companies Vectura Group PLC and Hikma Pharmaceuticals PLC to gain approval for their generics, Informa's PharmaVitae believes that Advair generics will not be released in the US until late-2019.
Following the approval of Gilead Sciences Inc.’s HIV treatment Biktarvy (B/F/TAF) in February 2018, investors will look for reassurance that GSK will be able to defend the position of ViiV Healthcare 's Triumeq (dolutegravir) and Tivicay (dolutegravir) within the market. "Investors will look for GSK’s strategy to defend these two leading and critical brands," Spray told Scrip.
Attention is also on updates on GSK’s pipeline and launch drugs. Investors will want to know whether sales from launch drugs will be able to offset declines in the Advair franchise due to generics. Investors will look in particular for updates on Trelegy Ellipta (fluticasone/umeclidinium/vilanterol), Breo Ellipta (fluticasone/vilanterol), shingles vaccine Shingrix and ViiV's new two-drug regimen Juluca (dolutegravir/rilpivirine), Spray said.
GSK will also be expected to provide an update on its attempt to gain approval for its respiratory drug Nucala (mepolizumab) for chronic obstructive pulmonary disease (COPD). GSK reported mixed Phase III results for Nucala in COPD in November 2017 before filing for approval in December. Nucala only resulted in modest benefits for patients and as such has been subject to concern by investors as to whether the drug will be accepted for approval by the FDA in this indication.
After the purchase of Novartis AG’s remaining stake in GSK’s consumer health business for $13bn and the divestment of its rare diseases assets to Orchard Therapeutics, investors will likely question GSK on its plans for future M&A and in/out-licensing deals. (Also see "GSK Gains Clarity For Pharma Focus Through Novartis Consumer JV Buy" - Scrip, 27 Mar, 2018.)
GSK’s oncology pipeline is depleted and lacks late-stage products that will contribute to revenue growth. As Emma Walmsley has identified oncology as a main pillar of R&D focus, investors will want to know whether GSK plans to license products to add to its depleted oncology business. (Also see "Orchard To Use Divested GSK Rare Disease Gene Therapies To Grow Globally" - Scrip, 12 Apr, 2018.)
Insights may also come on CEO Walmsley's revamped leadership team. She has just hired Genentech Inc.’s Kevin Sin, who will focus on potential research and development deals. He is set to join GSK in July and report to Hal Barron, who took over as GSK’s chief scientific officer last year.
Roche's Hemlibra And Tecentriq To Be In Focus
When Roche reports first-quarter sales on April 26 analysts will be gauging the balance between new growth drivers and biosimilar competition to leading brands like Rituxan/Mabthera (rituximab) and Herceptin (trastuzumab). Still, most analysts expect Roche's launches of new drugs to have helped take the edge off that damage. With US Rituxan biosimilar approvals expected in the second half of the year, analysts will be seeking guidance on biosimilar uptake trends and management's expectations for the remainder of the year.
The competitive position of PD-L1 inhibitor Tecentriq in non-small cell lung cancer (NSCLC) and clues on further clinical data readouts in NSCLC and other tumor types from Roche's IMpower studies will be sought, along with color on other key trials in lung cancer due to read out in 2018. (Also see "Roche's IMpower150 Gets AACR Applause But Merck's KEYNOTE-189 Big Winner " - Scrip, 17 Apr, 2018.)
Investors will also want an update on Roche's hemophilia drug Hemlibra (emicizumab) which earlier this month won breakthrough designation from the FDA, accelerating its passage through the clinic as a therapy for hemophilia A patients without factor VIII inhibitors. The drug is currently restricted to patients who have those inhibitors, so a new indication would boost sales strongly, analysts say. Comment on the drug's safety will thus be listened to after five patients taking Hemlibra died. Roche has said none of the deaths was believed to be linked to Hemlibra. (Also see "Five Hemlibra Deaths But Not Caused By Hemophilia Drug – Roche" - Pink Sheet, 28 Mar, 2018.)
Also topical is Roche's M&A strategy, given recent moves by peers and scrutiny of recent acquisitions by the Swiss group. Will its purchase of Flatiron Health Inc., for example, herald more moves to bring digital partners in-house? (Also see "Roche To Improve Real-World Cancer Data Extraction With Flatiron Buy" - Medtech Insight, 21 Feb, 2018.)