Colleague Anita Greil aptly summarizes the significance of this milestone, and wisely assesses the reasons for Vasella’s decision.
It’s certainly not as sexy as the government probe into hedge funds, where people communicated in code, used special cell phones, had money drop schemes and informants with wire taps. no, this case against Johnson & Johnson announced today alleging it gave a healthcare provider kickbacks is, well, downright boring when it comes to the theatrics. The evidence: a white paper, a power point presentation and emails.
Despite the lack of drama, the charges are pretty serious. The U.S. Attorney in Massachusetts alleges that J&J gave kickbacks to Omnicare to have the provider of drugs to nursing homes push more J&J products. (See the complaint.)
Mergers & Acquisitions, Pharmaceuticals, Wall Street / 1 Comment
As my fellow blogger, Gabby, noted in an earlier post, something seems rotten in the state of Switzerland. And the financial markets agree. Novartis, for a host of good reasons, wants to get into the eye care business in a big way by purchasing Alcon for close to $50 billion. It plans to buy a huge stake that Nestle has in Alcon for $180 a share. But it plans to pay the remaining “minority” holders 2.8 Novartis shares for each Alcon share they own – the equivalent of about $147. Traders apparently believe Alcon holders will fight to get more money – Alcon is trading around $160 – close to 9% higher.
Novartis says it believes paying different prices is “fair” because, paying more for the Nestle stake allows Novartis to gain control of Alcon. There is something that can be said about paying a control premium. But offering existing shareholders less than what they had at the end of last week? If Novartis wants to make good with a new set of shareholders (those minority Alcon folks), it should find a way to pony up more money.
Health, Health Care, Mergers & Acquisitions, Pharmaceuticals / 3 Comments
Sanofi-Aventis’ $1.9 billion acquisition of Chattem, a maker of over-the-counter lotions and potions, is the latest move by a big drug maker to embrace the steady returns of low-tech medications. It’s quite a switch from the conventional wisdom of just a few years ago, which posited that drug makers should run, not walk, away from everyday drugstore staples. One after another sold off their anti-bacterial mouthwashes and diaper rash creams. They did so in order to focus on science-based discoveries to fill their new-product pipelines and thereby prove to investors they could deliver so-called blockbuster cures for dread diseases that afflicted many. The times have changed. To be sure, from a scientific standpoint, the Golden Age of Biology continues as researchers the world over revolutionize our understanding of – for want of a better word – life. But in the mundane world of balance sheets and market valuations, drug makers simply can’t afford to bet big on science because it’s expensive and risky, and too many recent discoveries have either failed or have been too similar to existing drugs to warrant hefty price tags. To be sure, CEOs such as Novartis’s Daniel Vasella still speak eloquently about breakthrough drugs, yet they’re increasingly gravitating to safe ventures. Novartis itself has long been a champion of generic-drug production. For many years, it was just about the only major pharma company which produced generic versions of its off-patent prescription medications. Now, some of its competitors, such as Pfizer and GlaxoSmithKline, are diving into generics to reap their safe, steady revenue stream. Just last year, Pfizer set up a unit specifically to focus on the business for the first time. The Sanofi-Chattem deal speaks volumes about the current state of affairs in the pharmaceutical industry: Chattem brings to the Paris-based drug maker a number of products it acquired when giant Pfizer sold its cupboard of staples to Johnson & Johnson, which then had to divest of certain items to meet anti-trust concerns. As Pfizer subsequently encountered difficulties generating high-tech blockbusters to replace those losing patent protection, it came under fire for having walked away from those very same steady-earning staples. The recent Pfizer-Wyeth deal brought a number of over-the-counter products back to the Pfizer medicine cabinet. Ironic, eh? (My colleague Jacob Goldstein has a nice blog on this subject; have a look.)
In the 1990s, drug maker Novartis AG introduced a potent cancer drug named Gleevec; its powers have been chronicled by grateful patients ever since. Now comes further evidence that Novartis has a successor drug which may even be superior to the original. Called Tasigna, it worked better than Gleevec in a clinical trial. A reticent Novartis says only that Tasigna produced “faster and deeper responses” than Gleevec in adult patients newly diagnosed with chronic myeloid leukaemia. The drug maker’s No. 2 best-selling medication, it’s likely to generate $4 billion in sales this year; revenues are still rising at around 10% annually. The problem for Novartis is Gleevec will lose patent protection in 2015, at which time it will face competition from low-cost knock-offs. This may seem far into the future but for a pharmaceutical company it’s tantamount to tomorrow. Replacing billions of dollars in lost revenues requires many, many years of new-drug development. Tasigna would therefore appear to be a knight in shining armour – both for Novartis and for patients.
Health, Health Care, Pharmaceuticals, Regulation / 2 Comments
Allergan would seem to have a compelling free-speech case in its suit against the U.S. federal government. In essence, Botox is approved for certain uses, including smoothing facial wrinkles. But off-label uses include treating migraines and easing spasticity. Allergan claims Food and Drug Administration rules barring it from talking about unapproved potential uses of Botox violate its constitutional free-speech rights. As DJN colleague Tom Gryta writes, the regulator lets drug makers “distribute reprints of medical-journal articles that discuss certain off-label uses of drugs, but generally bars company representatives from proactively discussing the material further.” An Allergan executive tells Tom the company isn’t pursuing the case on any other firm’s behalf. Still, if it prevails “drug companies inclined to push the envelope on off-label marketing may feel emboldened,” Tom writes. My father, who died in June 2008, was treated with Botox for spasticity – his hands had become rigid and clawlike as a result of his Parkinson’s or Multiple Myeloma or both. He couldn’t move his fingers at all. A physician prescribed Botox injections to loosen the muscles, so to speak. The FDA allows doctors to prescribe drugs as they see fit, even for unapproved treatments. In my Dad’s case, the Botox didn’t work particularly well – but that might have been because his illness was so far gone or he didn’t pursue the injections long enough. The issue of non-approved uses of prescription drugs is an enormously important one. The Allergan case is certainly one to watch.
Earnings, Health Care, Pharmaceuticals, Retailing / 1 Comment
Successful companies don’t stop innovating during tough times. And they get even smarter about cost control without giving up customer service. those two factors seem to be behind Walgreens strong earnings report today which sent sales up 7.6% while earnings fell 1.5%. (The stock closed at $37.35 a share, up 9.24%).
Walgreens has redesigned stores and cutback on new store openings to focus on the business it currently has and those moves have been paying off. On top of that, it has been looking for ways to attract new business.
Earnings, Economy, Health Care, Pharmaceuticals / Comments Off
One of the fears that is often associated with industry consolidation is in product pricing – the fewer industry players means less competition which usually translates into higher prices.
That appears to be going on in the generic drug business, at least through the eyes of one company that does business with generics: Rite Aid.
During a conference call on its second quarter earnings, Rite Aid said margins were hurt in its pharmacy business because of generic price drug increases. That will likely be a theme for CVS as well. While these price increases may hurt the pharmacy companies, they will be good news for the generic drug makers.
It goes without saying but I have to say it: stealing a CEO’s mother’s ashes and torching his home should deal an enormous setback to Europe’s animal rights movement. It’s an already discredited effort, of course, what with activists having already terrorized workers in the U.K.’s drug-testing industry (and their families.) As the WSJ’s Jeanne Whalen reports, Novartis AG, the big drug maker based in Switzerland, alleges animal rights militants stole CEO Daniel Vasella’s mother’s ashes from the Swiss town of Chur, and burned Vasella’s lodge in Bach, Austria. The desecration of Vasella’s mother’s grave happened about a week ago; the alleged arson was early Monday. U.K.-based Stop Huntingdon Animal Cruelty has come out and said it wasn’t behind the acts. Police are probing. Whether or not SHAC was involved in the Novartis incidents, the group has a sordid history, including harassing employees of a British testing lab with U.S. facilities called Huntingdon Life Sciences. People who want the world’s drug makers and testers to use animals more humanely should act humanely. I would also add this, from a Novartis spokeswoman: “It is important that people realize that it is not possible to discover novel products … which save thousands of human lives every year without some use of animal data, which is required by regulatory authorities.”
A decade ago, Human Genome Sciences Inc., founded in 1992 by genomic genius William Haseltine to commercialize gene research, was flying high. So were the shares of a great many biotech and high-tech firms. Then came the bursting of the internet bubble. HGS’s shares went from three digits to single digits. Haseltine eventually exited HGS. And today, the company still doesn’t have much on the market; its 2008 revenue totaled $48.3 million. But it does have one promising medication, for lupus, and today, as the firm announced promising clinical trial results, HGS’s shares shot up by more than 200%. I recount all this by way of demonstrating how painstaking, fraught and expensive drug-development is – and how desperate disease sufferers are. Lupus patients are likely to snap up this drug (called Benlysta) – when and if it hits the market – even though it’s effective in only some patients. It’s the extreme difficulty of developing new medications for life’s most severe health afflictions that makes the pharmaceutical and biotech industries so defensive when they’re challenged about rising drug prices, so-called lifestyle drugs, fat marketing budgets and big sales forces. Big-selling medications that command fat profit margins – however derivative and look-alike they are – help fund research and development budgets. Yes, they enrich pharma executives but they also can enrich shareholders. All this said, the following line in a recent WSJ story about Biogen Idec took my breath away: “Biogen’s top seller, the multiple-sclerosis drug Avonex, rose 12% to $591 million in quarterly sales. The company said Avonex’ sales had grown about 2% on a unit basis, but it has also continued to raise Avonex’ price, by between 20% and 30% in the last year, according to data from Medicare. It now costs about $26,400 a year. Other MS drugs have also raised their prices.” I’m not naive about the pharma industry, but an annual price increase of between 20% and 30% – for a drug whose patients are beyond desperation, due to the intractability of MS – in the midst of a global economic crisis doesn’t sit right. It’s quite possible that the bosses of Biogen Idec and other MS drug makers simply had to mandate a price hike to deliver promised profit margins. And one can’t argue with a big fat price increase when there are customers willing to pay up. Indeed, DJN colleague Tom Gryta reports that the new lupus drug, Benlysta, will probably cost about the same as an MS drug. It’s the free market, delivering life-enhancing drugs at exorbitant prices. Continue reading…