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Zacks Industry Outlook Highlights: Mylan, Lilly, Pfizer, Novartis and Amgen

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For Immediate Release

Chicago, IL – November 01, 2016 – Today, Zacks Equity Research discusses the Pharmaceuticals, part 1, including Mylan (NASDAQ:(MYL - Free Report) – Free Report) , Lilly (NYSE:(LLY - Free Report) – Free Report) , Pfizer (NYSE:(PFE - Free Report) Free Report), Novartis (NYSE:(NVS - Free Report) – Free Report) and Amgen (NASDAQ:(AMGN - Free Report) – Free Report) .

Industry: Pharmaceuticals, part 1

Link: commentary/94802/pharma- industry-outlook---november- 2016

It’s been a rough year for pharma and biotech stocks with several factors weighing on the sector including media and political focus on the high price of drugs, mixed performance results, slower-than-expected new product launches and increasing competition.

The impact of these issues is more evident on biotech stocks, with the NASDAQ Biotechnology Index declining 20.9% year-to-date (YTD) while the NYSE ARCA Pharmaceutical Index has lost 10.9% YTD.

Drug Pricing to Remain in Focus

Right now, the biggest issue that is weighing on the sector is the political rhetoric regarding drug pricing. With presidential candidates, policymakers, the media and the general public focusing on the high price tags for drugs, the drug pricing controversy is not likely to die down easily.

In fact, the drug pricing issue heated up recently given the price hikes taken by Mylan (NASDAQ:(MYL - Free Report) – Free Report) for its life-saving combination product EpiPen. Democratic Presidential candidate Hillary Clinton announced a health care plan that will address the excessive price hikes of treatments that have been around for years and also reaffirmed her earlier broader plan, announced in Sep 2015, with the aim to lower drug prices for all Americans.

Insulin drugmakers like Lilly (NYSE:(LLY - Free Report) – Free Report) and Novo Nordisk are also under attack with Senator Bernie Sanders posting a series of tweets questioning the prices of their insulin drugs.

Will M&As Pick Up Pace?

With the major price correction resulting in reasonable valuations, expectations are high that more M&A deals will be announced in the coming quarters. So far in 2016, some of the announced/completed acquisitions include Shire-Baxalta, Bristol-Myers-Padlock, and Pfizer (NYSE:(PFE - Free Report) Free Report) -Medivation, among others.

In fact, the Pfizer-Medivation deal, valued at approximately $14 billion, has raised hopes that major M&As will pick pace once elections are over while licensing deals and small bolt-on acquisitions will continue.

Several pharma companies are focusing on in-licensing mid-to-late stage pipeline candidates that look promising, instead of developing a product from scratch, which involves a lot of funds and time. Small biotech companies are open to such deals, with most of them finding it challenging to raise cash, thereby making it difficult to survive and continue with the development of promising pipeline candidates. Therefore, it makes sense to seek deals with pharma companies sitting on huge piles of cash.

Divestment of Non-Core Assets & Restructuring Activities

Another trend being witnessed is the divestment of non-core business segments. Companies like Pfizer, UCB, Novartis (NYSE:(NVS - Free Report) – Free Report) , Glaxo and AstraZeneca have all been a part of this trend. More recently, Sanofi is looking to divest its generics portfolio in Europe while Valeant is in discussions for various divestitures including the Salix business. The monetization of non-core assets allows these companies to focus on their areas of expertise.

Restructuring activities are also gaining momentum as large pharma companies look to cut costs and streamline operations. Most of these companies are re-evaluating their pipelines and discontinuing programs with an unfavorable risk-benefit profile.

New Products Should Gain Traction

Highly-awaited new products that gained approval last year should contribute significantly to revenues. Some of the important new product approvals include Vertex’s cystic fibrosis treatment, Orkambi, Amgen’s (NASDAQ:(AMGN - Free Report) – Free Report) heart failure treatment, Corlanor, Pfizer’s cancer treatment, Ibrance, Novartis’ psoriasis treatment, Cosentyx, PCSK9 inhibitors – Amgen’s Repatha and Sanofi/Regeneron’s Praluent, Roche’s advanced melanoma treatment, Cotellic and Gilead’s Genvoya (HIV).

Meanwhile, so far in 2016, the FDA has approved 19 new drugs including Zinplava (c. difficile infection), Lartruvo (soft tissue carcinoma), Exondys 51 (Duchenne muscular dystrophy), Epclusa (HCV), Ocaliva (rare, chronic liver disease), Zinbryta (multiple sclerosis), Tecentriq (urothelial cancer), Venclexta (chronic lymphocytic leukemia in patients with a specific chromosomal abnormality), Taltz (moderate-to-severe plaque psoriasis), Cinqair (severe asthma) and Zepatier (HCV) among others. The FDA also expanded the label of cancer drugs like Kyprolis, Imbruvica and Xalkori.

Biosimilars Gaining Importance

With the FDA approving the first biosimilar in the U.S. (Zarxio, a biosimilar version of Amgen’s blockbuster drug, Neupogen), the floodgates have opened. While biosimilars have been available in the EU for quite a while, there was no regulatory pathway for biosimilars in the U.S.

The second biosimilar to gain approval in the U.S. was Pfizer and Celltrion’s Inflectra (infliximab-dyyb) with the reference product being Remicade.

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