This is not a good time to release news. Everyone is on Holiday. Bio Techs are under pressure because of the following deal:
"Express Scripts and AbbVie Drug-Pricing Deal
Express Scripts and AbbVie Drug-Pricing Deal Might Devastate Biotech Bull Market
BY Adam Feuerstein Follow|
12/22/14 - 06:14 AM EST|
BOSTON (TheStreet) -- The exclusive hepatitis C pharmacy deal struck between Express Scripts (ESRX) and AbbVie (ABBV) is a serious, perhaps permanent, blow to the multi-year biotech stock bull market.
The power to control drug prices in the U.S. now has shifted firmly to cost-cutting insurance carriers and pharmacy benefit managers. This means biotech companies, especially those facing competition, can't guarantee the outsized profits investors have come to expect and crave.
After today, investors are no longer going to ask biotech executives, "What will you charge for your new drug?" Instead, the new question becomes: "What will Express Scripts -- or any other pharmacy benefit manager --- allow you to charge for your new drug?"
That's a huge, fundamental change which is likely to put downward pressure on lofty biotech stock valuations.
The deal between AbbVie and Express Scripts focuses only on the price of hepatitis C drugs, but expect future cost concessions to be wrung from other high-priced diseases, including cancer.
Under terms of the deal announced Sunday night, AbbVie agreed to significantly discount the price of its Viekira Pak hepatitis C therapy in exchange for exclusive access to Express Script's 25 million customers. Starting Jan. 1, Gilead Sciences' (GILD) competing hepatitis C drugs, Sovaldi and Harvoni, will be excluded from Express Scripts' formulary. The deal covers patients with genotype 1 hepatitis C, the most common form of the liver disease in the U.S.
Insurance companies and PBMs like Express Scripts have long been vocal critics of high drug pricing. In the past year, they have complained loudly about the budget-busting impact of huge numbers of patients seeking cures with the new hepatitis C drugs.
Gilead set the price of Sovaldi at $1,000 per day, or $84,000 for a 12-week course of treatment. Harvoni, which combines Sovaldi with another Gilead medicine, was priced at $94,500 for a 12-week treatment.
Health plans and PBMs were largely forced to cover the costs of Gilead's hepatitis C drugs because they were the most effective and only treatments available. That changed Friday when the Food and Drug Administration approved Abbvie's Viekira Pak. The company set the sticker price of Viekira Pak at $83,300 for 12 weeks of treatment, a small discount to Harvoni which suggested a reluctance to compete solely on price.
But then AbbVie negotiated for exclusive formulary access to with Express Scripts. The negotiated price for Viekira Pak was not disclosed, but Express Scripts said it was a "significant discount" to the drug's sticker price.
What's next? Express Scripts Chief Medical Officer Steve Miller is fairly blunt, telling Bloomberg, "We look at this as being the first of what will happen in the field of cancer, rheumatoid arthritis and many other of the expensive specialty fields."
That's a statement which should send shivers of fear running down the spine of every biotech CEO and investor.
Last week, Juno Therapeutics (JUNO) and Bellicum Pharmaceuticals (BLCM) completed successful initial public offerings. Both companies are racing ahead to develop so-called CAR-T therapies -- immune cells taken from a patient and genetically re-engineered to recognize and kill blood cancer cells. Novartis (NVS) and Kite Pharmaceuticals (KITE) are also developing CAR-T therapies.
The field of cancer immunotherapy is red hot right now and investors seem to have an insatiable appetite for these companies. But CAR-T therapies, once approved, are expected to cost $350,000 or more. Will Express Scripts offer exclusive access to its cancer patients to Novartis in exchange for a discounted price? Or Juno? If that happens, does Kite get frozen out like Gilead?
It's a scary but real scenario which could repeat itself in any disease area where drug prices are high and competition is abundant: cancer, rheumatoid arthritis, diabetes.
The only biotech and drug companies potentially protected from reined-in drug prices might be those developing unique and highly effective treatments. Bluebird Bio's (BLUE) gene therapy comes to mind. Or Vertex Pharma's (VRTX) cystic fibrosis therapies. But how long can those companies keep competition and drug pricing pressure at bay in a new era where health plans and PBMS call the shots?
It may take some time to sink in, but the Express Scripts-AbbVie deal is a tectonic shift in the control of drug prices which is going to have far-reaching ramifications on the profitability and valuations of biotech stocks."
I hope this is just the start of the news releases. While the news maybe good is the stock price reaction an indication the market was expecting the Stage II announcement?
Unfortunately, most people understand this company moves at a glacier like pace. If their past track record is any indication of their ability to complete phase 1 we are looking at a minimum of two years before we enter phase 2 on this new drug. History has shown that when BPTH says something is to be completed within the first half of the year, they mean the end of June at best with news to follow several months later.
I would prefer they focus on becoming a phase 2 company with respect to Grb-2 rather than devote energy or money to a new drug. What happened to their proposed treatment for breast cancer utilizing Grb-2?
It is interesting they released the news shortly after I made my own decision that I will be selling all of my stock no later than April 2016 unless this company demonstrates they can move forward at a more rapid pace.
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