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Pharma Stock Roundup: J&J Slips on Mixed Q1, Lilly Hit by FDA CRL

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Johnson & Johnson (JNJ - Free Report) kicked off the first quarter earnings season for the pharma sector this week. Meanwhile, Lilly (LLY - Free Report) was also in the news with the company receiving a complete response letter (CRL) for its experimental rheumatoid arthritis (RA) treatment, baricitinib.

Recap of the Week’s Most Important Stories

J&J Down on Mixed Q1 Results: Industry bellwether J&J posted mixed Q1 results this week with the company surpassing earnings expectations but missing on revenues. Shares were down 3.1% leaving the investment community jittery about how the rest of the sector would perform (Read more: J&J Q1 Earnings Beat Estimates, Pharma Sales Slow Down).

CRL for Lilly’s RA Drug, FDA Wants More Data: Lilly and partner Incyte were in for a major disappointment with the FDA issuing a CRL for their experimental RA treatment, baricitinib. The agency told the companies that it is unable to approve baricitinib, a once-daily oral medication for the treatment of moderate-to-severe RA, in its current form. What is concerning is that the agency has asked for additional clinical data to determine the most appropriate doses as well as to further characterize safety concerns across treatment arms. This means delayed approval timelines and additional costs depending on the studies that may need to be conducted. Lilly and Incyte said that they were not in agreement with the FDA and the timing for resubmission would be based on further discussions with the agency.

We note that baricitinib was approved in the EU under the trade name Olumiant in Feb 2017 (Read more: Eli Lilly's Rheumatoid Arthritis Drug Gets CRL in the U.S.).

BTD for Novartis CAR-T Drug: Swiss pharma giant Novartis (NVS - Free Report) got a second Breakthrough Therapy designation (BTD) for its experimental CAR-T therapy, CTL019. The company got BTD for the treatment of adults with relapsed and refractory (r/r) diffuse large B-cell lymphoma (DLBCL), who have failed two or more prior therapies. According to the American Society of Clinical Oncology, DLBCL is the most common form of lymphoma accounting for about 30% of all non-Hodgkin lymphoma cases. The company expects to file for FDA approval of this indication by year end.

Novartis had previously got BTD designation for the treatment of r/r B-cell acute lymphoblastic leukemia (ALL) in pediatric and young adult patients. CTL019 is currently under priority review in the U.S. for this indication (Read more: Novartis' CTL109 BLA Gets Breakthrough Therapy Status).

Developments on the NASH Front: Novartis and Allergan (AGN - Free Report) entered into a clinical trial agreement to conduct a phase IIb study on Novartis’ FXR agonist and Allergan's cenicriviroc (CVC) for the treatment of NASH, non-alcoholic steatohepatitis (Read more: Allergan Collaborates with Novartis to Treat NASH). Allergan has also signed up with TARGET PharmaSolutions, a clinical data company focused on real world evidence, on its TARGET-NASH study. The aim of the five-year longitudinal observational study is to help facilitate a greater understanding of the impact of NASH and future treatment options.

Meanwhile, Bristol-Myers (BMY - Free Report) announced a collaboration agreement with Danish company, Nordic Bioscience, for the development of biomarker technology that would help in the diagnosis and monitoring of fibrotic diseases including NASH (Read more: Bristol-Myers and Nordic Ink Biomarker Collaboration Deal).

NASH is an increasingly common, progressive form of fatty-liver disease which is becoming a significant and growing health issue given the rising obesity epidemic. With no treatments currently approved for this disease, the market opportunity is significant. Several companies are working on developing treatments for NASH -- the market could be worth billions of dollars and many companies are hoping to cash in on this opportunity.

Nivalis-Alpine in Merger Agreement: Nivalis and privately-held biotech company, Alpine Immune Sciences, Inc., entered into a merger agreement with the deal slated to close in the third quarter. The combined company with a novel protein-based discovery platform will be focused on inflammation and immuno-oncology. Nivalis, which suffered a huge setback with disappointing mid-stage data on its lead pipeline candidate (cavosonstat), had decided to wind down its research and development activities while evaluating strategic alternatives. The combined company will have about $90 million in cash and equivalents and expects to commence an early-stage study on a dual ICOS/CD28 antagonist engineered for use in autoimmune and inflammatory diseases in the second half of 2018.

Pipeline and Regulatory Updates from Roche: Roche (RHHBY - Free Report) had quite a few pipeline and regulatory updates including label expansion for two drugs. The FDA granted approval for the use of Lucentis for the monthly treatment of withal forms of diabetic retinopathy, the leading cause of blindness among working age adults in the country. This makes Lucentis the first and only FDA-approved medicine to treat diabetic retinopathy in people who have been diagnosed with or without diabetic macular edema (DME).

Roche also got FDA approval for the use of its first cancer immunotherapy Tecentriq in an additional type of advanced bladder cancer. Tecentriq, which gained FDA approval last year, can now be used for the first-line treatment of people with locally advanced or metastatic urothelial carcinoma (mUC) not eligible for cisplatin chemotherapy. The label expansion will increase the patient population for Tecentriq. This is the third approval for Tecentriq in less than a year in the U.S.

Roche also announced positive interim results on emicizumab from a late-stage study in children with hemophilia A. Results showed a clinically meaningful reduction in the number of bleeds over time.

Roche has outperformed the Zacks categorized Large Cap Pharmaceuticals industry year-to-date with shares gaining 11.3%, compared to the industry gain of 4%.

Sanofi, Regeneron Face Patent Infringement Lawsuit for Dupixent: Sanofi (SNY - Free Report) and partner Regeneron are facing a patent infringement lawsuit filed by Amgen’s Immunex Corporation related to their recently approved eczema treatment, Dupixent. We note that Sanofi and Regeneron had already filed a lawsuit prior to the approval of Dupixent seeking a court order that their drug does not infringe a patent held by Amgen. The lawsuit was a proactive move by the companies to prevent Amgen from initiating a patent infringement lawsuit like it had related to Sanofi and Regeneron’s PCSK9 inhibitor Praluent. Sanofi is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.


Large Cap Pharmaceuticals Industry 5YR % Return

The NYSE ARCA Pharmaceutical Index dipped slightly (0.82%) over the last four trading sessions. Among major pharma stocks, Lilly lost 4.6% with the shares reflecting the impact of the CRL while Bristol-Myers was up 1.2%. Over the last six months, Bristol-Myers gained 6.1% while AstraZeneca was down 3.6% (See the last pharma roundup here: Merck Gets CRL for Label Expansion Effort, Roche Cancer Drug Tops).

What's Next in the Pharma World?

First quarter earnings season has started and quite a few pharma companies are scheduled to report next week. Companies like Lilly, Novartis, Sanofi and Bristol-Myers will all be reporting results in the coming days.

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