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Agreed.
I wish I could remember or locate the article downplaying the commercial potential of everolimous. I can't recall the articles reason for dismissing the potential for this class of drugs. In any case, in addition to the stent coating, renal cancer and large cell cancer indications for which it is approved, NVS has indicated that there are approximately a half dozen clinical trials to evaluate further uses. In a sense these m-Tor inhibitors seem to possess the potential to act as a pipeline in a single drug. For this reason, I suspect we will see a lot of other firms pursuing similar drugs.
FL
Amazing how time changes the perceptions of m-Tor inhibitors.
I remember about 24 months ago where Afinitor was being dismissed as a relatively minor drug. Wish I could locate the article.
FL
http://seekingalpha.com/article/248175-genie-about-to-come-out-of-ariad-s-bottle?source=yahoo
I've also wanted a glimpse at what other FOB products MNTA has set its sights on. However, it is apparent as soon as such disclosures are announced it causes a reflex response in the firm that holds patent to try to protect the branded product (assuming that the patent has some avenue of legal defense). As such, while in the short term such an announcement could help move MNTA's SP, it might (depending on the target) be smarter to move in a stealth manner to forestall the legal maneuvering.
FL
I'd caution that PFE will likely face stiff competition for Spiriva in the coming months. NVS has launched onbrez in many European markets and filed for approval in the US in late Sept. Since the filing provides the testing results that address the FDA issues from 2009 Approvable letter, I think it is highly likely to gain approval.
I'm long NVS. However, it seems like PFE is vulnerable on many fronts.
FL
That was my read as well. However, when NVS was down more than 1% this morning, I questioned that read.
The down market appears to be sector related fallout from Mrk.
The article advocates first line of treatment for hypertension. More importantly it clearly indicates that results are not as good for patients switching from mono therapy. This should provide a strong inducement for prescribing this combination early, not trying other single treatments before eventually switching.
Are there other combination therapies available or other Renin inhibitors currently approved that could be brought to market as part of a similar combination therapy?
Thanks
FL
Any thoughts on Tekamlo sales following the results of the Lancet ACCELERATE study?
http://online.wsj.com/article/BT-CO-20110113-703389.html
Hypertension study supports use of NVS combination pill.
http://www.reuters.com/article/idUSLDE70B0J520110113?feedType=RSS&feedName=rbssHealthcareNews&rpc=43
Hypertension Study supports NVS combination pill.
http://www.reuters.com/article/idUSLDE70B0J520110113?feedType=RSS&feedName=rbssHealthcareNews&rpc=43
Don't read too much into my comment. I was half joking. If Dew updated his MNTA read First page every time Marth indicated that an answer or approval was due to occur, he'd have to hire additional administrative help.
I agree that FDA doesn't typically telegraph approvals.
FL
You might want to add the FDA's "answer" to Teva's t-Lovenox application which is due by the end of January or possibly you have totally discounted anything that Marth says.
Regards
FL
I can remember Merk's Januvia beating NVS' Galvus by several weeks in filing for Diabetes. NVS got an "approvable" letter but opted to never file the additional information. Instead NVS gained approval for Galvus in in many countries outside of the US but gave up on the US.
Sometimes there is an advantage to the first filer in that some degree of benchmarking may occur.
FL
Any thoughts on Last nights 60 min piece on GSK violations at the now shuttered Puerto Rico Facility? $96 million for the whistle blower seems pretty steep. It has to have major corporations pretty scared.
FL
If pressed to come up with an NVS Achilles's heel I'd say that it could be competitive pressures on several fronts could damage the branded pharma franchise as NVS is trying to ramp new drugs to offset the patent expiry of Diovan and Gleevec. For instance Denosumab may take some share of the osteoporosis and cancer sales (although I beleive some analysts estimates are vastly overestimated). Other oral MS drugs are bound to hit the market in the next few years and will increase the competition cor Gilenya. Given the breadth and diversity of the the NVS product offings it is far more insulated from taking a hit from a single patent expiration. It would take multiple failures on several fronts including the pipeline.
NVS survived such a scenario a few years ago when Zelnorm was pulled from the market, Lotrel was the victim of an at risk launch by Teva, Prexige was the victim of the vioxx aftermath (no US approval) and Galvus was the victim of an FDA approvable letter that was sufficient for NVS to opt out of the US diabetes market. I think these events made NVS stronger internationally and less dependent on the US market. It also drove NVS to diversify away from branded pharma (bought additional OTC assets from BMS, vaccine company Chiron, bought Hexal and Eon, and most recently the vision care giant Alcon).
I believe NVS strategy has been vindicated by the number of competitors tying to emulate it (expansion into vision care, biogenerics etc.). NVS has long said that they wanted to be the dominant producer of difficult to manufacture generic drugs (FOB's, etc). This strategy now appears to be playing out with their partner MNTA. Generic drugs have become such a commodity that their is tremendous pressure to be first to launch to win a few months of exclusivity. NVS saw this and found a niche that is less exploited where competitive pressures will not be as great. As such, I think the vision provided by Vasella was second to none. Hopefully this will continue under Jimenez.
Back to the Achilles's heel again, I think NVS harbors the dream of merging with Roche at some point in the future to create a super pharma company. While the combination of NVS, Roche and Genentech would be dominant, it could be fraught with corporate culture integration issues.
I agree with you statement about the geographic and product offering diversification provided by NVS. That is the chief reason I'm in the stock. NVS has to be one of the safest plays on emerging markets. They have spent considerable capital to do it right (buying businesses and integrating into China and now Russia). By becoming a major employer in these countries they have provided some insulation against political backlash that comes when foreign companies win too much market share. NVS has not written off India despite that Country's poor stand on intellectual property. The purchase of NVS india shows they are willing to put business decisions ahead of sour grapes.
Despite these positives, the PE multiple on NVS has dropped from 18 when I bought my first shares to about 11 now. This has happenned due the share price stagnating while the earnings ave steadily grown. I guess I'm holding on believing at some point it will revert back to the mean. The demographic tailwind caused by the baby boomer generation reaching peak drug consumption years would seem justify an improved multiple for the sector.
I'm obviously long NVS and I have my biases, but I always try to look objectively at each of my holdings.
FL
At the time both provided a diversified health care play I was looking for. At the time, JnJ looked stronger in just apharma, etc.). These things changed.
FL
I believe that that is the gist of the article Dew posted several months ago. With the growth, JnJ lost key personnel who were instrumental with quality control at the troubled McNeil unit.
The entire quality control culture was undermined.
It will be real interesting to see how various JnJ brands fare in the next couple of years. Competitors directly attacked some brands such as tylenol by issuing rebates and other promotions for switching.
FL
I think you made a good move.
While the multiples are depressed in health care (especially big pharma), yet JnJ trades as a slight premium despite these numerous lapses. I looked seriously at JnJ and NVS a few years ago and chose NVS. While NVS may perpetually trade at a discount due to its European roots (and Wall Street biases), they appear to be navigating troubled waters that better than most.
Good Luck
FL
Definitely being sarcastic. I find it hard to believe what has happened to the storied corporate culture at JnJ. I think Dew posted a link to an article that provided a in depth look at the quality control deterioration at JnJ. Unfortunately, JnJ has been viewed as a widow and orphans stock. Some of those investors may be sorry if the market decides that JnJ is no longer best of breed.
I'm certain they will have no difficulty tracking down the hip implants because they will all be listed on the class action lawsuit. Unfortunately for the recipients of these implants, there is no easy fix. I guess the bright side is the heightened awareness will lead to intervention before too much tissue damage occurs. That doesn't help the recipients that have already developed problems. Dew is right it will be an expensive fix.
FL
Unlike the tainted tylenol, it will not be possible to send out undercover teams to covertly reclaim the diffective DePuy hip implants. I expect that the standards for surgical implants will get tougher as a result.
FL
With Alcon out of the way, I would not be surprised if NVS makes additional overtures toward the acquisition of MNTA. Obviously they have had discussions in the past since there was an agreement that NVS would not make such an offer. This agreement expired over a year ago and market continues to keep MNTA in Limbo. Perhaps MNTA is now more open to the friendly takeover at a nice premium.
If not, I'm certain that NVS will run interference to keep others from launching a hostile takeover.
Disclosure, I'm long both.
FL
With Alcon out of the way, I would not be surprised if NVS makes additional overtures toward the acquisition of MNTA. Obviously they have had discussions in the past since there was an agreement that NVS would not make such an offer. This agreement expired over a year ago and market continues to keep MNTA in Limbo. Perhaps MNTA is now more open to the friendly takeover at a nice premium.
If not, I'm certain that NVS will run interference to keep others from launching a hostile takeover.
Disclosure, I'm long both.
FL
NVS closes Alcon minority stake.
Shorts scramble to cover.
http://blogs.wsj.com/source/2010/12/15/novartis-plays-long-hardball-game-in-acquisition-of-alcon/?mod=yahoo_hs
One of the points that Vasella made when Mark Fishman was hired was that NVS would fund research into rare genetic disorders. These diseases are rarely researched by other pharma because the markets were presumed too small. NVS' thinking is that the once a pathway is understood and an effective treatment developed that similar pathways may be shared by other poorly understood diseases.
A side benefit to this approach can be better patent protection afforded by orphan drug status. NVS has been successful finding broader application for a drug once it is developed as in the case of Gleevec use for GIST.
http://www.nibr.com/newsroom/stories/03-09_innovation.shtml
Anyone care to handicap whether MNTA is a likely collaborator
on generic rituxan. I've seen several poorly referenced links such as the following which suggest that NVS is working on generic Rituxan.
NVS has smartly decided to keep new FOB projects under wraps. However they have confirmed that they have 8-10 FOB projects underway for products coming off patent in the next couple years. Rituxan would certainly seem like a lucrative target.
It seems that if MNTA wants to avoid the royalty cliff issue the face with m-enox they need to be more of an equal partner (similar to the copaxone agreement). This will require them to pony up for more of the initial costs.
I realize this link is likely to be nothing more than speculation. However, if they progress to mid stage trials in the near future it will be evident.
FL
Reported 2 hours ago - Updated 2 hours ago - 1 Documents
Novartis AG
Novartis AG
Novartis' Sandoz Unit Working On Copy Of Roche Drug - Source
ZURICH -(Dow Jones)- Novartis AG's (NVS) generics unit Sandoz is close to starting mid-stage patient trials for its copy of Roche Holding AG's (ROG.VX) cancer and rheumatoid arthritis drug Rituxan, which is also known as Mabthera, a person familiar with ... [Published 2 hours ago by FOXBusiness.com]
Entities: Sandoz, Novartis AG, Roche Holding AG, Rituxan
http://www.silobreaker.com/rituxan-11_511392
Besides the patent expiration reasons stated, it is apparent that the sales staff needs to be commensurate with market opportunities. The US is becoming a relatively stagnant Pharma market. I think NVS felt that a streamlined sales force could function fine and that global resources were best directed to faster growing markets.
FL
NVS has gotten pummeled the past two weeks. The short position is at nearly 35 million shares. I think this may be an all time high. The hedge fund community appears to be betting that NVS will need to up their offer for the minority stake in Alcon before the end of the year. I don't think the shorts will be as confident going into the new year when they could be blindsided by any number of news items (good Gilenya launch data, all business units clicking like last quarter etc.).
I think NVS should show the shorts that they are serious about being comfortable owning 77% of Alcon. Perhaps a tender offer to purchase MNTA at 30 would send a message to the hedge fund community that they see no urgency to consummate the Alcon takeover. I imagine that MNTA has told NVS that they want to remain independent for now. I'm certain NVS would not do a hostile takeover but there must be a price where MNTA would say bring a tender offer. I would think a 80 to 100% premium would provide a good discussion point.
FL
Last weeks Wells Fargo analysis of Teva seems to read too much into low vol copaxone.
FL
Valuation Range: $64.00 to $67.00
Our valuation range is based on a P/E multiple of 12.0-12.5x our 2011 cash EPS
estimate of $5.36. Risks to the stock trading to our valuation range include
Copaxone deceleration/adverse litigation outcome, and significant generic price
erosion.
Investment Thesis:
We rate TEVA shares Outperform. We continue to believe TEVA is "best-in-class"
in generics, with vertical integration, a global footprint, broad pipeline, and generic
biologics capabilities.
However, we believe the concern about a delay in approval of the low volume formulation is
misplaced. Our view is predicated on the notion that the more information FDA needs from TEVA to determine sameness of the low volume formulation to the existing one makes the hurdle for generic
approval incrementally higher. Therefore, any delays in approval of low volume Copaxone, due to
requests for more data, will likely delay FDA action on Copaxone ANDAs further.
Current valuation reflects bear case scenario, in our view. Nevertheless, we cannot absolutely rule
out the possibility that generic Copaxone could arrive before the low volume formulation is approved.
Therefore, we analyzed the potential EPS impact of a January 2011 generic approval. If we assume 50%
generic erosion, 60% operating contribution, and 15% tax rate, such a scenario would decrease 2011 cash EPS
by $0.69 to $4.67. At $50.53, TEVA shares are trading at 10.8x bear-case EPS. For comparison, WPI and
MYL are trading at 12.4x and 9.8x (average: 11.1x) respective consensus EPS estimates. Therefore, it seems
TEVA’s current valuation reflects this more pessimistic scenario, despite the low probability of its occurrence.
TEVA remains best-positioned to capitalize on the upcoming wave of patent expiration in the
US, in our view. We have conducted an analysis of the dynamics of the upcoming patent expiration cycle.
Among the current top 50 small molecule branded drugs in the US, 22 could face generic competition in 2011-
2014. Of those products, TEVA has 16 disclosed ANDA filings (11 tentative approvals) for brands representing
~$41 billion in sales (Source: IMS, LTM ending 9/2010). Of these 16 products, we believe 10 products, with
combined brand sales of ~$24 billion, could be limited competition opportunities. This should allow TEVA’s
US generics business to grow faster than the market.
I agree with your restatement. While I find the Lupenox Teva connection likely, I don't think it can be stated as a fact without additional corroborating evidence.
Have a happy thanksgiving.
FL
I thought Patrick might be the same. The Blog would be more effective if it didn't lose coherency in some places (i.e., end of 3rd paragraph).
FL
Have a Happy Thanksgiving
Found this Blog on the Teva Board
Looks like most of the ammo came from previous IHUB posts. Either way it looks like a slow day so I thought I'd re-post it.
FL
http://www.chasingthealpha.com/2010/11/why-tevas-investors-should-be-worried.html
Launches at Risk
There was a thread going a few days ago about launches which occurred at risk before the court resolution of the patent issues.
I think Lotrel fits in that group. TEVA has been extremely aggressive with this strategy. I'd love to see them on the receiving end.
FL
http://www.drugs.com/newdrugs/teva-provides-update-lotrel-489.html
NVS typically announces the proposed dividend in Jan. ratifies it at the annual mtg in feb and pay it out in April.
FL
I agree that the information in the Barrons article was readily available. However, Barron's seems to play to an older demographic which like their information packaged neatly. A bigger question is whether the hiring of Symonds (a former Goldman Sacs exec)as CFO signals a change in NVS where they will try to increase visibility. Wed should be interesting.
FL
I think the omnitrope case was not a criticism of FDA. Perhaps FDA was pleased to have the court provide the interpretation of their review authority since it helped clear up the gray areas. I don't think the omnitrope matter hurt NVS' standing with FDA.
FL
While I've been known to suspect my share of conspiracies, I agree the fact that it trades illogically is not evidence of a conspiracy on its own. The herd mentality runs deep on Wall Street. The TEVA overhang is enough to keep larger players (GS, MS etc.)from calling it a conviction buy. So, much of the herd does'nt move until they get that ringing endorsement. Interestingly, I believe that MNTA/NVS are also creating a similar overhang on TEVA shares as potential investors sweat out the copaxone patent issue.
As time goes on (assuming no TEVA approval), MNTA will start to trade based on the cash it is accumulating. Cash on the balance sheet will not be overlooked by the street. At some point a higher multiple will be awarded based on the intellectual property, but the street doesn't appear ready to assign such a multiple right now.
The FDA laid out a strong rationale for the MNTA/NVS approval. This has withstood SNY attempts to overturn. I'm betting that the rationale just as strongly supports not approving the Teva application at this time.
So in the mean time I see a slow ramp for MNTA as cash builds until a game changing event (invalidation of copaxone patents etc.).
FL
Joe "we owe BP an apology" Barton is fast becoming a true standard bearer for downtrodden big companies with inferior technology.
The ridiculous side of this article is that 81 people in the US died and numerous others were sickened by the contaminated heparin. How long would it have taken to solve this public health crisis if FDA did not ask for MNTA's assistance? If Mr. Barton was so concerned about tainting FDA impartiality he could have offered to throw up a couple Chinese walls between FDA and MNTA when they were working to solve the contaminated heparin issue. Perhaps TEVA hadn't yet cried on his shoulder to appraise him of how this little company was beating them to the punch.
I'm beginning to wonder whether the objective here is to try to push FDA into approving other Lovenox generics or whether they are trying to put FDA into a defensive position when reviewing other MNTA applications (i.e., copaxone).
FL
4th quarter looking strong
Barring unforeseen conditions (like the buyout of the minority Alcon stake), the combination of recent drug releases (Gilenia,m-enox), flu vaccine and one time items ($35M MNTA payment, $500M Enablex sale) should make for a strong year end for NVS.
FL
MNTA Potential outside of Lovenox and Copaxone.
This board has some very intelligent posters who are very focused on parsing Teva's recent conference call language. The market is currently pricing MNTA based solely on m-enox and the Teva overhang. I'd like to hear some speculation on the broader future potential of MNTA outside of the programs that have already been announced. Specifically what drugs coming off patent in the next 5 years might be logical targets for MNTA's proprietary reverse engineering technology. If possible include the patent sunset date and the current sales information.
I think NVS mentioned in one of the past investor day conferences that they had several targets in development. When I get some time I'll see if I can track down any specific Sandoz information on projects that might be a logical fit for MNTA.
I think this exercise could help us evaluate the broader potential. If this thread exists somewhere please feel free to direct me to it.
Thanks FL
Perhaps Mr. Marth meant that TEVA already received appreciable benefit from the amount of time that the legal system took to process the Markman Hearing information and to render a decision on the motion for summary judgment. It seems like the summary judgment boiled down to a simple enough decision on whether sufficient information existed in the Judge's eyes to set aside the patent protection. If he was uncomfortable with this decision, then a rapid denial of the summary judgment request would have allowed the decision to be litigated in a more timely manner. Teva in a sense did win a battle in the war based on the amount of time it took for the decision to rendered.
Teva's strategy is clear, file enough motions, counter motions etc. to drive the patent litigation as far down the road as possible (2012 based on today's call). This seems to be an area where Teva excels due to the numerous patent challenges they have launched.
Regards
FL
Question about the Sanofi lawsuit against MNTA/NVS, doesn't their safety argument lose validity every day that goes by without safety issues arising.
FL
I work in a regulatory compliance field and one of the ways industry often tries to cope with changes in regulations (or changes in the playing field) is to hire a regulator who is perceived to be able to grease the skids to expedite approvals. While Teva has a wealth of experience in conventional pharma products, I think they sense that the game is changing and they believe that Mr, Buehler might help overcome some of the difficulties they are experiencing or that he might help with some deficiencies they might have with regulator relationships. I see this as a possible move by Teva to counter some of the FDA ties/credibility that MNTA established by helping to identify the contaminated heparin source and through the educational process of wining approval for m-enox.
I agree with Dew that the science must be there to support the application, however they may be gray areas where Teva believes lobbying may be useful. As noted in the attached link, Teva appears to be signaling a strategy to try to finesse technical impasses and regulatory issues through lobbying.
http://www.fiercepharma.com/story/teva-recruits-fdas-former-generics-chief/2010-10-18