Although some big names like AstraZeneca AZN and Mylan MYL reported Q3 results this week, earnings reports were overshadowed by the run-up to the Presidential election and the surprise win of Donald Trump. In fact, the pharma sector responded favorably to Trump's victory on hopes that there will be fewer drug pricing headwinds considering Trump was not as vocal as Hillary Clinton about rising drug prices and excessive price hikes. Trump's pro-business stand is also expected to benefit the sector. Major pharma companies should gain from Trump's proposed tax plan and proposal to repatriate corporate profits held offshore at a one-time tax rate of 10%.
Recap of the Week's Most Important Stories
Crestor Generics Hit AstraZeneca Revenues: AstraZeneca's third quarter results were mixed with the company beating on earnings but falling short on revenues. In addition to cost management, earnings benefited from a non-recurring inter-government tax agreement as well. Shares were down following the release of Q3 results with sales being impacted by the genericization of Crestor. AstraZeneca also said that it was not likely to seek approval for its experimental immuno-oncology treatment, durvalumab, for second-line head and neck squamous cell carcinoma (HNSCC) based on the phase II HAWK study. The single arm study was initially designed as a potential fast-to-market opportunity for the second line indication but the company's changed plans were based on the recent changes in the HNSCC landscape including the approval of Merck's MRK Keytruda for this patient population. Moreover, durvalumab was placed on partial clinical hold by the FDA in late October for HNSCC.
Valeant Q3 Results Disappoint: Valeant VRX reported disappointing Q3 results missing both earnings and revenue estimates. Valeant also slashed its outlook for 2016 (Read more: Valeant Pharma Q3 Earnings Miss, Slashes Guidance ). The company is facing several headwinds apart from the drug pricing issue and ongoing investigations into its pricing policy. Generic competition for some products, soft performance of the dermatology business, a 3-month delay in the FDA action date for brodalumab (severe psoriasis), quality challenges related to manufacturing issues (Valeant got a warning letter for its Rochester, NY site from the FDA), product recalls, and back orders are some of the issues being faced by the company. Moreover, B+L international is facing challenges in Europe due to weakness in Poland and the Middle East, especially Turkey and Egypt. Not surprisingly, earnings estimates for Valeant are seeing downward revisions following the release of Q3 results.
Is Pfizer Contemplating Sale of Consumer Healthcare Unit? According to a Reuters article, Pfizer PFE is considering the sale or spin-off of its consumer health segment for as much as $14 billion. The company's consumer healthcare segment, which brought in sales of $2.5 billion in the first nine months of 2016, is known for products like Advil, Centrum and Chapstick among others.
We remind investors that earlier this year, Pfizer had decided against splitting up its business. However, on the third quarter call on being asked about the consumer business, CEO Read had said that the company evaluates all its businesses and subjects them to tests to see whether they are worth more inside or outside Pfizer.
Meanwhile, Pfizer was also in the news for the EU approval of Ibrance for a specific type of breast cancer. This makes Ibrance the first medicine in a new class of anti-cancer treatments, CDK 4/6 inhibitors, to be approved in Europe and also the first new medicine to be approved for the treatment of women with this particular type of metastatic breast cancer in the first-line setting in almost 10 years. Ibrance is one of the most promising new products in Pfizer's portfolio and EU approval was expected considering the CHMP had issued a positive opinion in September. Ibrance sales were $1.5 billion in the first nine months of 2016.
Pfizer is a Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Mylan & Partner Biocon File Herceptin Biosimilar: Mylan, which missed Q3 estimates (Read more: Mylan Q3 Earnings & Revenues Miss on EpiPen Woes ), announced the submission of a regulatory application for a biosimilar version of Roche's RHHBY Herceptin (trastuzumab) in the U.S. This is Mylan's first FDA biosimilar submission, and the company believes it has the potential to be the first to seek approval for a biosimilar version of Herceptin in the U.S.
Bristol-Myers Provides Updates on Opdivo, Signs Deal with Nitto: Bristol-Myers BMY came out with several updates this week. The company gained FDA approval for its immuno-oncology treatment Opdivo for use in head and neck cancer.
Opdivo also met the primary endpoint in a late-stage study for unresectable advanced or recurrent gastric cancer refractory to, or intolerant of, standard therapy. This is good news for the company as Opdivo is the first and only immuno-oncology agent to demonstrate overall survival advantage in this patient population.
The company also announced a 5-year research collaboration with Johns Hopkins University for the identification of mechanisms of response and resistance in patients whose cancer is being treated with checkpoint inhibitor-based immunotherapies, including Opdivo monotherapy, or Opdivo in combination with Yervoy or other investigational immunotherapies.
A clinical trial agreement was also signed with Infinity for Opdivo plus Infinity's IPI-549 in patients with advanced solid tumors.
The company has also signed an exclusive worldwide license agreement with Nitto Denko for the development and commercialization of Nitto's investigational siRNA molecules targeting heat shock protein 47 (HSP47) in vitamin A containing formulations. The collaboration includes Nitto's lead asset ND-L02-s0201, currently in early-stage development for the treatment of advanced liver fibrosis.
The agreement will see Bristol-Myers shelling out $100 million upfront and making subsequent payments in the form of clinical and regulatory milestone payments, royalties, sales based milestone payments as well as option exercise payments for lung and other organ fibrosis. This deal once again shows pharma's interest in developing treatments for fibrotic diseases and to develop therapies for patients living with advanced non-alcoholic steatohepatitis (NASH) and cirrhosis due to NASH.
Large Cap Pharmaceuticals Industry Price Index
The NYSE ARCA Pharmaceutical Index recorded a gain of 7.6% over the last five trading days reflecting a positive response to Trump's win. Moreover, Proposition 61, California's ballot measure to ensure that the State of California is able to negotiate with drug companies for drug prices that do not exceed the price paid for the same drugs by the U.S. Department of Veterans Affairs, was shot down by voters.
Among major pharma stocks, both Pfizer and Bristol-Myers shot up more than 12% while AstraZeneca was down slightly on Q3 results. Over the last six months, Bristol-Myers declined 20.8% while Merck was up 18.8% (See the last pharma stock roundup here: Pfizer, Allergan Q3 Results Fall Short, Insulin Drugmakers under Pricing Pressure ).
What's Next in the Pharma World?
Companies like Bristol-Myers will be showcasing data at the annual meeting of the American College of Rheumatology (ACR) and the Association of Rheumatology Health Professionals (ARHP) in the coming days. Bristol-Myers will also be presenting data along with Pfizer on Eliquis at the American Heart Association (AHA) Scientific Sessions 2016.
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