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Analyst Blog

Once again, acquisitions and deals were in focus in the pharma sector with Lilly (LLY - Free Report) announcing a deal to boost its animal health segment and Allergan (AGN - Free Report) and AstraZeneca (AZN - Free Report) announcing licensing agreements. Meanwhile, companies like Johnson & Johnson (JNJ - Free Report) and Novartis (NVS - Free Report) presented data at the European Academy of Dermatology and Venereology (EADV) Congress.   

Recap of the Week’s Most Important Stories

Lilly Signs Deal to Boost Animal Health Segment: Lilly’s animal health division, Elanco, will be buying Boehringer Ingelheim Vetmedica, Inc.'s U.S. feline, canine and rabies vaccines portfolio as well as a fully integrated manufacturing and R&D site. Lilly will shell out $885 million for the deal, slated to close by early 2017. With this acquisition, Elanco is looking to diversify its companion animal portfolio by complementing its offerings for dogs and cats. Lilly expects the deal to be earnings accretive in 2018.

Allergan Continues Deal-Signing Spree: Allergan continues to pursue deals to expand its portfolio. The company, which announced a slew of acquisition deals last month, announced an in-licensing agreement with AstraZeneca under which it will acquire global rights to AstraZeneca’s MEDI2070. With this deal, Allergan is looking to strengthen its position in gastroenterology. MEDI2070, an anti-IL-23 monoclonal antibody, is currently in phase IIb development for the treatment of patients with moderate-to-severe Crohn's disease and is phase II ready for ulcerative colitis and other related conditions. Expectations are that targeting just IL-23 may allow for a broader therapeutic window compared to IL12/23 targeting therapies and may translate into better efficacy.

The deal will see Allergan making an upfront payment of $250 million plus up to $1.27 billion, payable over a period of up to 15 years – this includes launch milestone payments of up to $435 million and sales-based milestone payments of $725 million. AstraZeneca will also get tiered royalties on product sales (Read more: Allergan Buys Rights to AstraZeneca's Crohn's Disease Drug).

AstraZeneca’s Brilinta Disappoints in PAD Study: AstraZeneca’s efforts to expand Brilinta’s label suffered a setback with the blood-thinning drug failing to meet the primary endpoint in a study conducted in a symptomatic peripheral artery disease (PAD) patient population. Brilinta failed to show a benefit over Plavix (clopidogrel). We note that earlier this year, Brilinta had missed the primary endpoint in another study as well – this one being in patients with acute ischemic stroke or transient ischemic attack (Read more: AstraZeneca Heart Drug Brilinta Fails a Study; Shares Down).

AstraZeneca also announced a licensing agreement with Insmed under which the latter will get global exclusive rights to AZD7986, an oral DPP1 inhibitor. AstraZeneca will get $30 million upfront and could get up to $120 million on the achievement of clinical, regulatory, and sales-related milestones as well as tiered royalties.

Meanwhile, NICE recommended the use of AstraZeneca’s Tagrisso (osimertinib) for use in patients with a particularly aggressive form of lung cancer.

Boxed Warning for J&J, Merck & Bristol-Myers HCV Drugs: The FDA has issued a warning about the risk of hepatitis B virus (HBV) becoming an active infection again in any patient who has or had HBV and is being treated with certain direct-acting antiviral (DAA) medicines for hepatitis C virus (HCV). With some of the HBV reactivation cases leading to serious liver problems or death, the FDA is requiring the addition of a Boxed Warning to the labels of 9 DAA medicines including Bristol-Myers’ (BMY - Free Report) Daklinza, J&J’s Olysio and Merck’s (MRK - Free Report) Zepatier. J&J, Merck and Bristol-Myers are all Zacks Rank #3 (Hold) stocks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teva to Divest Certain Assets in the UK and Ireland: Teva will be selling assets and operations of Actavis Generics in the UK and Ireland to Accord Healthcare Limited for GBP 603 million. The divestment is being done to meet the requirements of the European Commission related to Teva’s acquisition of Actavis Generics earlier this year.

Meanwhile, Teva completed its acquisition of Anda, Inc., a leading distributor of generic pharmaceuticals in the U.S., from Allergan.

J&J, Novartis Present Psoriasis Data at EADV: J&J presented data on its experimental psoriasis treatment, guselkumab, at the EADV Congress. Results showed high rates of skin clearance in patients with moderate to severe plaque psoriasis receiving guselkumab, with the responses being durable and maintained through week 48. Moreover, guselkumab showed superior efficacy compared with AbbVie’s Humira (Read more: J&J's Psoriasis Drug Shows Superior Efficacy Over Humira).

Swiss drugmaker Novartis was also at EADV with new data showing that its psoriasis treatment, Cosentyx, delivers high and long-lasting skin clearance in patients with moderate-to-severe plaque psoriasis out to 4 years of treatment.

Performance

Large Cap Pharmaceuticals Industry Price Index

Almost all major pharma stocks were up over the last five trading days with the NYSE ARCA Pharmaceutical Index gaining 1.1%. Lilly gained 2.5% during this period while AstraZeneca was down 1.4%. Over the last six months, Bristol-Myers declined 17.7% while Merck was up 12.9% (See the last pharma stock roundup here: Allergan Acquisitions in Focus, J&J to Buy Abbott's AMO).

What's Next in the Pharma World?

Watch out for the usual pipeline and regulatory updates as well as deals and collaborations. Several companies will be presenting data at the European Society for Medical Oncology (ESMO) Congress from Oct 7–11.

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