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Pharma Stock Roundup: Lilly to Cut Jobs, Streamline Operations, NVS CEO to Step Down in 2018
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There were quite a few important developments this week with Eli Lilly and Company (LLY - Free Report) announcing that it is streamlining its operations and cutting down its workforce as it focuses on developing new medicines and improving its cost structure. Meanwhile, Novartis (NVS - Free Report) announced that its CEO will be stepping down in 2018.
Recap of the Week’s Most Important Stories
Lilly to Streamline Operations, Cut Jobs: Lilly announced a restructuring plan which will see the company streamlining operations so that it can focus on developing new medicines and improving its cost structure. The company will be cutting down 3,500 jobs with most of the reductions expected from a U.S. voluntary early retirement program. Lilly will also be closing down certain sites and will move production from its Larchwood, IA animal health manufacturing facility to an existing plant in Fort Dodge, IA. A research and development office in Bridgewater, NJ, and the Lilly China Research and Development Center in Shanghai, China, will also shut down.
Lilly expects to generate annualized savings of about $500 million from 2018 – this will be used toward improving the cost structure, new product launches and label expansion studies. The streamlining program will result in the company incurring pre-tax charges of about $1.2 billion (post-tax charges of 80 cents per share) which will be recognized in the third and fourth quarters of 2017. While this will cut down the reported earnings guidance, adjusted earnings outlook remains unchanged. Lilly also said that with its streamlining efforts, it now expects to achieve an OPEX-to-revenue ratio of 49% or less in 2018, indicating an improvement from its previous forecast.
Merck to Buy Rigontec in Immuno-Oncology Focused Deal: The immune-oncology space continues to attract the interest of big pharma players with Merck (MRK - Free Report) announcing its intention to acquire Rigontec in a deal worth up to €464 million including an upfront payment of €115 million. Rigontec's expertise lies in accessing the retinoic acid-inducible gene I (RIG-I) pathway, which is a part of the innate immune system, with the goal of inducing both immediate and long-term anti-tumor immunity. The acquisition will add Rigontec’s lead candidate, RGT100, to Merck’s pipeline. RGT100 is currently in early-stage development in patients with various tumors (Also read: Merck Opts for Buying German Immuno-Oncology Biotech).
Merck also announced that the European Commission has expanded the label of its anti-PD-1 therapy, Keytruda, for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma, a type of bladder cancer (Also read: Merck's Keytruda Gets EU Approval for Bladder Cancer).
BMY’s Opdivo Impresses in RCC Study: Bristol-Myers Squibb Company (BMY - Free Report) had some mixed news on its PD-1 immune checkpoint inhibitor Opdivo. The company said that a late-stage study (CheckMate -214) evaluating Opdivo plus Yervoy was stopped early for showing overall survival (“OS”) benefit in patients with previously untreated advanced or metastatic renal cell carcinoma (“RCC”).
Following a planned interim analysis, an independent Data Monitoring Committee (“DMC”) recommended that the study should be stopped early. The combination would provide RCC patients with a new first-line treatment option. Approval for this indication would boost sales significantly. There is significant unmet need in this area with RCC being the most common type of kidney cancer in adults with a five-year survival rate for the advanced or metastatic stage being 12.1%.
The second set of Opdivo related news was not so encouraging with the company saying that a partial clinical hold has been placed by the FDA on three Opdivo-based combination studies in multiple myeloma. The FDA decided to place the studies on partial hold following the identification of risks identified in combination studies evaluating Merck’s Keytruda for multiple myeloma.
Mylan Faces 3-Month Delay in Herceptin Biosimilar Decision: Mylan NV and partner Biocon will have to wait a bit longer before they get a response from the FDA for their biosimilar version of Roche’s blockbuster drug, Herceptin (trastuzumab). The FDA informed Mylan that it is extending the target action date by three months so that it can review some of the clarificatory information submitted to them as a part of the application review process. As a result, the regulatory body will now issue a response regarding the approval status of the biosimilar on Dec 3, 2017.
The biosimilar version had received a favorable vote (16-0) in July from the FDA’s Oncologic Drugs Advisory Committee (“ODAC”). Herceptin is approved for a wide range of indications including HER2+ breast cancer in the metastatic and adjuvant settings.
Novartis CEO to Retire in 2018, Replacement Announced: Novartis’ CEO, Joseph Jimenez, will be stepping down from his position in 2018. The Board of Directors has appointed Vasant (Vas) Narasimhan, M.D., Global Head of Drug Development and Chief Medical Officer, as his successor, effective Feb 1, 2018 (Also read: Narasimhan to Replace Jimenez as Novartis CEO in 2018). Novartis' stock has gained 17.1% year to date, outperforming the 12.7% rally of the industry it belongs to. Novartis is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FDA Issues Warning Letter to Pfizer: Pfizer got a warning letter from the FDA regarding its manufacturing facility, Meridian Medical Technologies, Inc. at Brentwood, MO. The letter mentions significant violations of current good manufacturing practice (“CGMP”) requirements for combination products. The company has been accused of failing to thoroughly investigate several serious component and product failures for its EpiPen products (manufactured on behalf of Mylan), including failures associated with patient deaths and severe illness.
Earlier this year in March, Meridian Medical Technologies had announced a voluntary recall of its EpiPen products following the receipt of two previously disclosed reports outside the United States of failure to activate the device due to a potential defect in a supplier component.
The NYSE ARCA Pharmaceutical Index was up 1.5% over the last four trading sessions. Most major stocks recorded gains with AstraZeneca (AZN - Free Report) rising 6.9% while Bristol-Myers was up 3.9%. Over the last six months, Bristol-Myers was up 13.1% while Merck declined 1.1% (See the last pharma stock roundup here: Novartis CAR-T Drug Gets FDA Nod, Lilly Gives Baricitinib Update).
What's Next in the Pharma World?
Watch out for the usual pipeline and regulatory updates. The safety and effectiveness of GlaxoSmithKline plc’s (GSK - Free Report) shingles vaccine, Shingrix, will be reviewed by the FDA’s Vaccines and Related Biological Products Committee (“VRBPAC”) on Sep 13.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Pharma Stock Roundup: Lilly to Cut Jobs, Streamline Operations, NVS CEO to Step Down in 2018
There were quite a few important developments this week with Eli Lilly and Company (LLY - Free Report) announcing that it is streamlining its operations and cutting down its workforce as it focuses on developing new medicines and improving its cost structure. Meanwhile, Novartis (NVS - Free Report) announced that its CEO will be stepping down in 2018.
Recap of the Week’s Most Important Stories
Lilly to Streamline Operations, Cut Jobs: Lilly announced a restructuring plan which will see the company streamlining operations so that it can focus on developing new medicines and improving its cost structure. The company will be cutting down 3,500 jobs with most of the reductions expected from a U.S. voluntary early retirement program. Lilly will also be closing down certain sites and will move production from its Larchwood, IA animal health manufacturing facility to an existing plant in Fort Dodge, IA. A research and development office in Bridgewater, NJ, and the Lilly China Research and Development Center in Shanghai, China, will also shut down.
Lilly expects to generate annualized savings of about $500 million from 2018 – this will be used toward improving the cost structure, new product launches and label expansion studies. The streamlining program will result in the company incurring pre-tax charges of about $1.2 billion (post-tax charges of 80 cents per share) which will be recognized in the third and fourth quarters of 2017. While this will cut down the reported earnings guidance, adjusted earnings outlook remains unchanged. Lilly also said that with its streamlining efforts, it now expects to achieve an OPEX-to-revenue ratio of 49% or less in 2018, indicating an improvement from its previous forecast.
Merck to Buy Rigontec in Immuno-Oncology Focused Deal: The immune-oncology space continues to attract the interest of big pharma players with Merck (MRK - Free Report) announcing its intention to acquire Rigontec in a deal worth up to €464 million including an upfront payment of €115 million. Rigontec's expertise lies in accessing the retinoic acid-inducible gene I (RIG-I) pathway, which is a part of the innate immune system, with the goal of inducing both immediate and long-term anti-tumor immunity. The acquisition will add Rigontec’s lead candidate, RGT100, to Merck’s pipeline. RGT100 is currently in early-stage development in patients with various tumors (Also read: Merck Opts for Buying German Immuno-Oncology Biotech).
Merck also announced that the European Commission has expanded the label of its anti-PD-1 therapy, Keytruda, for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma, a type of bladder cancer (Also read: Merck's Keytruda Gets EU Approval for Bladder Cancer).
BMY’s Opdivo Impresses in RCC Study: Bristol-Myers Squibb Company (BMY - Free Report) had some mixed news on its PD-1 immune checkpoint inhibitor Opdivo. The company said that a late-stage study (CheckMate -214) evaluating Opdivo plus Yervoy was stopped early for showing overall survival (“OS”) benefit in patients with previously untreated advanced or metastatic renal cell carcinoma (“RCC”).
Following a planned interim analysis, an independent Data Monitoring Committee (“DMC”) recommended that the study should be stopped early. The combination would provide RCC patients with a new first-line treatment option. Approval for this indication would boost sales significantly. There is significant unmet need in this area with RCC being the most common type of kidney cancer in adults with a five-year survival rate for the advanced or metastatic stage being 12.1%.
The second set of Opdivo related news was not so encouraging with the company saying that a partial clinical hold has been placed by the FDA on three Opdivo-based combination studies in multiple myeloma. The FDA decided to place the studies on partial hold following the identification of risks identified in combination studies evaluating Merck’s Keytruda for multiple myeloma.
Mylan Faces 3-Month Delay in Herceptin Biosimilar Decision: Mylan NV and partner Biocon will have to wait a bit longer before they get a response from the FDA for their biosimilar version of Roche’s blockbuster drug, Herceptin (trastuzumab). The FDA informed Mylan that it is extending the target action date by three months so that it can review some of the clarificatory information submitted to them as a part of the application review process. As a result, the regulatory body will now issue a response regarding the approval status of the biosimilar on Dec 3, 2017.
The biosimilar version had received a favorable vote (16-0) in July from the FDA’s Oncologic Drugs Advisory Committee (“ODAC”). Herceptin is approved for a wide range of indications including HER2+ breast cancer in the metastatic and adjuvant settings.
Novartis CEO to Retire in 2018, Replacement Announced: Novartis’ CEO, Joseph Jimenez, will be stepping down from his position in 2018. The Board of Directors has appointed Vasant (Vas) Narasimhan, M.D., Global Head of Drug Development and Chief Medical Officer, as his successor, effective Feb 1, 2018 (Also read: Narasimhan to Replace Jimenez as Novartis CEO in 2018). Novartis' stock has gained 17.1% year to date, outperforming the 12.7% rally of the industry it belongs to. Novartis is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FDA Issues Warning Letter to Pfizer: Pfizer got a warning letter from the FDA regarding its manufacturing facility, Meridian Medical Technologies, Inc. at Brentwood, MO. The letter mentions significant violations of current good manufacturing practice (“CGMP”) requirements for combination products. The company has been accused of failing to thoroughly investigate several serious component and product failures for its EpiPen products (manufactured on behalf of Mylan), including failures associated with patient deaths and severe illness.
Earlier this year in March, Meridian Medical Technologies had announced a voluntary recall of its EpiPen products following the receipt of two previously disclosed reports outside the United States of failure to activate the device due to a potential defect in a supplier component.
Performance
Large Cap Pharmaceuticals Industry 5YR % Return
Large Cap Pharmaceuticals Industry 5YR % Return
The NYSE ARCA Pharmaceutical Index was up 1.5% over the last four trading sessions. Most major stocks recorded gains with AstraZeneca (AZN - Free Report) rising 6.9% while Bristol-Myers was up 3.9%. Over the last six months, Bristol-Myers was up 13.1% while Merck declined 1.1% (See the last pharma stock roundup here: Novartis CAR-T Drug Gets FDA Nod, Lilly Gives Baricitinib Update).
What's Next in the Pharma World?
Watch out for the usual pipeline and regulatory updates. The safety and effectiveness of GlaxoSmithKline plc’s (GSK - Free Report) shingles vaccine, Shingrix, will be reviewed by the FDA’s Vaccines and Related Biological Products Committee (“VRBPAC”) on Sep 13.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>