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Q1 earnings preview: Novo, Celgene still to come

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It hasn’t been the prettiest first quarter for drugmakers. Sanofi’s revenue fell, as did confidence in one of the company’s key growth drivers. Allergan discussed a strategic review aimed at turning around the specialty pharma, shares of which have dropped considerably over the last two years. And GlaxoSmithKline couldn’t shake the narrative of impeding generic competition to its flagship drug, despite strong performances elsewhere in its portfolio.

The tone could shift this week, however, as Gilead Sciences, Merck & Co. and Novo Nordisk start the final wave of biopharma first quarter earnings. Gilead will be reporting Yescarta (axicabtagene ciloleucel) revenues, offering an anticipated look into profitability of CAR-T therapies. Meanwhile, Merck is fresh off a victory at the American Association for Cancer Research’s annual conference, and Novo should provide updates on its deeper dive into blood disorder treatments.

Yet even with those highlights, pipeline and portfolio pressures have been a widespread issue in the early months of 2018. Companies have touted strategies to alleviate the pressures, but shareholders’ patience seems to be quite thin.

Gilead (May 1)

After the close on Tuesday, Gilead will tell its ongoing tale of declining hepatitis C revenues, while investors and analysts say this quarter is finally a flattening out of the negative trends for that franchise.

Beyond that, expect Gilead management to talk up its position in HIV — even as competitor GlaxoSmithKline continues to make waves in this therapeutic area.

The show-stopper during this earnings call with be the performance of the CAR-T drug Yescarta (axicabtagene ciloleucel). While expectations for sales of the living drug are low, there is a good chance that Yescarta will come in ahead of forecasts. The world is keenly watching these treatments to see if one-time therapies are commercially viable.

Merck & Co. (May 1)

2018 might be the year when Keytruda, long the second fiddle to Bristol-Myers Squibb’s Opdivo in global sales totals, becomes the top commercial immunotherapy.

If Keytruda does overtake Opdivo, it will likely be due to a commanding position in metastatic lung cancer that has led analysts to boost forecasts for the drug. Having already secured two approvals in the first-line setting, Keytruda looks set to gain further share after impressive results in a closely watched combination study.

Yet given the twisting fortunes of immunotherapy drugmakers, analysts are unlikely to treat Merck’s lead as a sure thing. Watch for questions on Merck’s combination strategy, particularly after the failure of a key study with Incyte Corp.’s IDO1 inhibitor.

So far, Merck hasn’t been linked to much M&A chatter. Its dependence on Keytruda — plus one of the slimmest pipelines in big pharma, according to analysts at Cowen — could up pressure to ink a deal, however.

Pfizer (May 1)

After announcing the end to its neuroscience ambitions earlier this year and failing to sell off the consumer unit, investors and analysts will be looking for clarity on what’s next with these assets. The company will also be expected to talk about any M&A prospects, although Pfizer’s CEO Ian Read has been frustratingly tight-lipped on this in the past.

Instead, expect Read and other Pfizer management to focus on progress the company’s making in its oncology and inflammation franchises. The big pharma had a setback earlier this year when its TKI inhibitor Inlyta (axitinib) failed in a Phase 3 kidney cancer study, yet Pfizer is still testing the drug in combination with its checkpoint inhibitor Bavencio (avelumab).

Novo Nordisk (May 2)

Investors in the diabetes drug giant will be looking to see if Chief Financial Officer Jesper Brandgaard’s prediction that Ozempic “could be Novo Nordisk’s largest opportunity so far” rings true.

But even if recent label updates for Tresiba and Victoza (liraglutide) help bolster sales of the diabetes franchise, the focus will be on what’s happening in the hot space of hemophilia.

Sales of Novo’s biopharmaceutical products fell by 16% in 2017, and the company been saying it wants to explore a new area of business and refocus its R&D strategy to become a more competitive player overall.

That new opportunity will likely come from the world of hematology. Last year brought the approval of Novo’s long-acting factor IX product for hemophilia B Rebinyn (coagulation factor IX [Recombinant], GlycoPEGylated). More recently, the company inked a deal to license EpiDestiny’s EPI01, which will be investigated for both sickle cell disease and beta thalassemia.

Celgene Corp. (May 4)

Pipeline pressures are stealing shine away from Celgene’s recovering portfolio.

U.S. sales of Otezla (apremilast) lagged in last year’s third quarter and were an integral reason behind Celgene missing consensus estimates for net product revenue. Things appear to have rebounded, however. Otezla sales ticked up last quarter, and look on track to beat first quarter consensus.

Concerns are now concentrated around ozanimod, one of the company’s few near-term growth opportunities. In late February, the Food and Drug Administration refused to review an approval application for the medication in multiple sclerosis. Despite reassurances from CEO Mark Alles, analysts question whether the delay will extend to other indications ozanimod is targeting. Celgene said it would ask to meet with the FDA to figure out how to remedy the application — something shareholders will want more details on during the company’s earnings call.

Against that backdrop, Celgene’s chief operating officer departed earlier this month. Updates on company management and long-term strategy could serve as a much-needed salve.

AstraZeneca (May 18)

The British pharma has pegged 2018 for a return to growth, predicting a low single-digit increase in sales after three years of declines.

Yet Crestor (rosuvastatin), Nexium (esomeprazole) and Symbicort (budesonide/formoterol fumarate) — all declining brands — still represent about 36% of AstraZeneca’s total product sales. And revenue from divestments and other externalization deals, which brought in more than $2.3 billion in 2017, is expected to come in lower this year.

If AstraZeneca is to meet its goal, then, the company’s new products will have to deliver.

Somewhat predictably for a big pharma, CEO Pascal Soriot has bet on oncology as a principal vehicle for those hopes.

Lung cancer med Tagrisso (osimertinib) looks set to become a blockbuster this year, boosted by strong results in a subset of patients with a certain mutation.

Investors, though, will be most curious about AstraZeneca’s PD-L1 inhibitor Imfinzi (durvalumab), which recently won U.S. approval in Stage 3, unresectable lung cancer. The OK puts Imfinzi ahead of other immunotherapy rivals in that market, even as the drug widely trails in the metastatic setting.

Unusually for a big pharma, AstraZeneca will increasingly count on China. Last year the Asian country made up 15% of company sales, and fast growth could make the China market an even larger part of AstraZeneca’s comeback story.

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