07.17.13
Lichtstrasse 35
CH-4056, Basel
Switzerland
Tel: (41) 61324 1111
Fax: (41) 61324 8001
www.novartis.com
Top Selling Drugs
Account for 55% of total pharma sales, up from 53% in 2011
Novartis’ integrated healthcare model has kept it near the top of our charts, with contributions coming from a wide range of areas. That setup hasn’t totally protected it from the patent cliff, as pharma revenues fell by $1.2 billion in 2012, which is almost exactly how much Diovan sales dropped as it began to face generic competition.
Diovan’s erosion has actually been slower than anticipated in the U.S. While the combination Diovan HCT product has competition from Mylan’s generic, the monotherapy, which generated more than 60% of Diovan revenues, has yet to see a generic entrant. This is because the rights to its 180-day generic exclusivity period are held by Ranbaxy, an Indian company that has gotten into a lot of trouble with the FDA in the past decade. In May 2013, Ranbaxy made a major settlement with the agency, and expects to get its generic Diovan monotherapy approved any time now. Since that approval will start the six-month exclusivity window, it looks like Novartis may not take too bad a revenue hit in 2013.
By the following year, of course, much of the bottom will fall out. Zometa and Gleevec patents will drop this year and 2015, respectively, leaving Novartis with more holes to fill. By then, revenue growth from its newer products may save the company from an extreme sales drop. Novartis certainly isn’t at risk of losing its spot as the #2 pharma in the world, but the Diovan uncertainty won’t help it pass Pfizer for #1.
In its November 2012 R&D update, the company noted that it had seven blockbusters by the end of 2011, and hopes to have 14 (or more!) by 2017. Gilenya crossed that barrier in 2012, and will likely be followed next year by Tasigna, Galvus and Afinitor. We’re not quite sure where another six (or more!) are going to come from, since they’ll (likely) need to replace Diovan, Gleevec and Zometa/Reclast. In addition, some fast-growing products may level out or fall quickly as competition mounts. (We’re looking at you, Gilenya. Sure, you may have blasted through the blockbuster ranks in no time flat as a first-in-class oral treatment for multiple sclerosis, but the arrival of Sanofi’s Aubagio and Biogen Idec’s Tecfidera may take the wind out of your sails.)
Novartis does have a raft of products that it plans to file for registration in the next year-plus, along with label expansions for critical products. Late-stage prospects cover oncology, heart failure, COPD, and an anti-inflammatory biologic that may have some benefits against MS.
In oncology, the company projects that physicians will shift from Gleevec to Tasigna as more data comes in; Novartians contend that Tasigna has a lower risk of progression for chronic myeloid leukemia than Gleevec does, with the implication that it can lead to treatment-free remission in patients. That would be an utter game-changer and would redound to Novartis’ credit.
The company also hopes to see good results from Jakavi, its JAK1/JAK2 inhibitor to treat the blood cancer myelofibrosis. Novartis got Jakavi approved in the EU, Canada and other markets, but licensing partner Incyte has the U.S. rights locked up. Incyte managed $136 million in Jakafi sales in 2012, and $48 million in 1Q13. Novartis saw $35 million in 1Q13 revenues from non-U.S. markets.
Novartis received Breakthrough Therapy designation for a treatment for patients with anaplastic lymphoma kinase positive (ALK+) metastatic non-small cell lung cancer (NSCLC), based on strong Phase I results. Two Phase II trials are ongoing and the company plans to go into Phase III later this year, with a filing as early as 2014, if all goes well.
There are also very high expectations for the company’s daily COPD combo-treatment QVA149. Peak sales estimates run as high as $5.0 billion, if Novartis can get its highest dose approved. One of the two ingredients in QVA149, glycopyrronium bromide, was approved in the EU in October 2012 as the Seebri Breezhaler, a once-daily maintenance dose of COPD.
Novartis made history in November 2012 when it received FDA approval for Flucelvax, the first flu vaccine made by cell culture rather than egg-based manufacturing. The new vaccine, to be made at a facility in NC paid for in part by the U.S. Department of Health and Human Services, should be able to accommodate both seasonal influenza and a pandemic disaster. The company is trying to build up its vaccine portfolio into a profit-making unit.
Novartis suffered a regulatory setback in April 2013 when India’s Supreme Court ruled that Gleevec (imatinib) is not eligible for patent protection in that country. Novartis had received a patent for imatinib in 1993, but the version in Gleevec is a compound that allows for bioavailability. The company argued that the molecule that was patented in 1993 “could not safely be administered to patients and represented only the first step in the process to develop Glivec as a viable treatment for cancer.” It’s a complex case, and not simply a compulsory licensing incident, although the Indian government has complained that the price of a round of treatment of Gleevec is too high.
In June 2013, Novartis began investigating a report that sales reps in India have been artificially inflating sales for Galvus diabetes medication, lying on invoices and using bonus money to buying Galvus from wholesalers, which would registered it as sales.
In other regulatory-legal news, Novartis was charged with colluding with competitors in two European markets — J&J in the Netherlands over generic fantanyl, and Roche in Italy over blocking Avastin in favor of Lucentis — and also got sued twice in four days in April 2013 by the U.S. government over kickbacks — to doctors to prescribe hypertension and diabetes drugs, and to pharmacies to move kidney transplant patients over to its immunosuppressant drug. The physician-related suit includes the charge of a $10,000 dinner for three at famed sushi restaurant Nobu. They should’ve held out for Masa. In November 2012, Novartis paid $20 million to the U.S. and Texas over Medicare fraud charges.
Each of those events (plus the ongoing quality troubles as a number of Novartis and Sandoz sites) sounds bad, but the worst press Novartis got in the past year came when chairman Dan Vasella retired, and Novartis revealed that it would pay him as much as $78 million over six years as part of a non-compete clause.
The press, the Swiss public, and many shareholders went ballistic. Coming in the same year that Novartis posted a sales shortfall and (more importantly) 2,500 layoffs, the package came off as obscene. Within weeks, both parties canceled the clause, even though Dr. Vasella pledged “to make the net amount available for philanthropic activities.”
Novartis has challenges ahead with multiple expirations, but its pipeline is delivering at the right time to see it through.
Lowe Down
As mentioned in my Pfizer writeup, Novartis is confidently spending a bundle on an expanded facility in Cambridge. As the first movers in the “Let’s take Big Pharma to Massachusetts” trend, they can feel proud for having been trendsetters. (Meanwhile, the degree to which New Jersey is emptying out is startling.)
The confidence is apparently justified. Novartis has one of the more wide-ranging drug pipelines in the industry, which is a good thing, since it’s looking at some patent-expiration worries. Nothing at AstraZeneca or Eli Lilly level, you understand (that is, more worrisome than terrifying), but inevitable just the same. The company doesn’t spend much time talking about its strategy to anyone else, so it’s hard to piece together Novartis’ plan to deal with all this. That wide range of drugs includes some prospects in extremely competitive fields, so the company might be looking for areas where there aren’t so many elbows being thrown (the company has mentioned Alzheimer’s as an interest, which is nothing if not wide open). But the wide-open fields got that way for good reasons. There will be some balancing to do . . .
Segments
Novartis makes no noises about splitting up its consolidated structure, although there’s occasional chirping from financial firms that would stand to gain by brokering that sort of split. With the departure of chairman, former chief executive officer, and Alcon-deal architect Dan Vasella, the reasoning goes, it might be time to devolve. But that deal hasn’t been a flop like Merck’s purchase of Schering-Plough, and it doesn’t seem to be a drag on the rest of the company’s performance. (The April 2013 resignation of the chief fiancial officer, Jon Symonds, also added a little fuel to that breakup fire.)
Still, as we do each year, we provide a breakdown of Novartis’ various revenue streams, and where they would each fall within our Top Companies listings.
Pharma: $32.2 billion (would fall to #5, between GSK and AZ)
Alcon: $10.2 billion ($4.0 billion in opthalmic pharmaceuticals would be added to Pharma, pushing Novartis past GSK)
Vaccines/Diagnostics: $1.9 billion (that would be good enough for #8 in our Top Biopharma ranks)
Sandoz (generics): $8.7 billion (good enough to squeeze between Gilead and Mylan for #19 on our list)
Consumer: $3.7 billion (down $900 million from last year, mainly because of those production problems at its Lincoln, NE site)
Qaulity is Jbo #1
Novartis’s total revenues and diversified structure have enabled it to challenge J&J as one of the biggest companies in the industry. The Swiss titan is also challenging J&J for the biggest meltdown of a consumer health manufacturing facility. Novartis’ site in Lincoln, NE went into Operation: Shutdown in December 2011 after a scathing FDA warning letter. Consumer Health sales dropped $900 million in 2012, which the company attributes “mainly” due to the problems at Lincoln.
In April 2013, the company announced plans to lay off 300 workers from the site, and to refocus the facility to process only oral and powdered drugs. The FDA inspected the site in February 2013, and Novartis began shipping an animal health product from the site in April. Novartis has also used some CMOs to produce several of its OTC products until Lincoln gets cleared by the agency. Those products include Excedrin, Lamisil and Triaminic, which resumed shipping in 4Q12.
In January 2013, Novartis recalled 200 lots of Triaminic and Theraflu because their CR caps didn’t work correctly. FDA received a dozen reports of children unscrewing bottle caps. The lots were manufactured before the warning letter in 2011.
Novartis has also been working its way out from warning letters issued in late 2011 to Sandoz sites in Colorado, North Carolina and Canada. The Colorado site was cleared in 4Q12, but another Sandoz facility was cited by FDA in May 2013. That one, in Unterach, Austria, handles parenterals and came over with the $1.2 billion EBEWE purchase in 2009.
CH-4056, Basel
Switzerland
Tel: (41) 61324 1111
Fax: (41) 61324 8001
www.novartis.com
Headcount | 120,000 | |
Year Established | 1996 | |
Pharma Revenues* | $46,732 | -3% |
Total Revenues | $56,673 | -3% |
Net Income | $9,618 | 4% |
R&D Budget | $9,116 | -1% |
Top Selling Drugs
Drug | Indication | $ | (+/- %) |
Gleevec | chronic myeloid leukemia | $4,675 | 0% |
Diovan | hypertension | $4,417 | -22% |
Lucentis | age-related macular degeneration | $2,398 | 17% |
Sandostatin | group acromegaly | $1,512 | 5% |
Exforge | hypertension | $1,352 | 12% |
Zometa | bone metastasis | $1,288 | -13% |
Gilenya | multiple sclerosis | $1,195 | 142% |
Exelon | Alzheimer’s disease | $1,050 | -2% |
Tasigna | chronic myeloid leukemia | $998 | 39% |
Galvus | diabetes | $910 | 34% |
Exjade | iron chelation | $870 | 2% |
Neoral | immunosuppression | $821 | -9% |
Afinitor | oncology | $797 | 80% |
Voltaren | inflammation/pain | $759 | -4% |
Reclast | osteoporosis | $590 | -4% |
Myfortic | transplantation | $579 | 12% |
Ritalin | ADHD | $554 | 1% |
Comtan | Parkinson’s disease | $530 | -14% |
Xolair | asthma | $504 | 5% |
Novartis’ integrated healthcare model has kept it near the top of our charts, with contributions coming from a wide range of areas. That setup hasn’t totally protected it from the patent cliff, as pharma revenues fell by $1.2 billion in 2012, which is almost exactly how much Diovan sales dropped as it began to face generic competition.
Diovan’s erosion has actually been slower than anticipated in the U.S. While the combination Diovan HCT product has competition from Mylan’s generic, the monotherapy, which generated more than 60% of Diovan revenues, has yet to see a generic entrant. This is because the rights to its 180-day generic exclusivity period are held by Ranbaxy, an Indian company that has gotten into a lot of trouble with the FDA in the past decade. In May 2013, Ranbaxy made a major settlement with the agency, and expects to get its generic Diovan monotherapy approved any time now. Since that approval will start the six-month exclusivity window, it looks like Novartis may not take too bad a revenue hit in 2013.
By the following year, of course, much of the bottom will fall out. Zometa and Gleevec patents will drop this year and 2015, respectively, leaving Novartis with more holes to fill. By then, revenue growth from its newer products may save the company from an extreme sales drop. Novartis certainly isn’t at risk of losing its spot as the #2 pharma in the world, but the Diovan uncertainty won’t help it pass Pfizer for #1.
In its November 2012 R&D update, the company noted that it had seven blockbusters by the end of 2011, and hopes to have 14 (or more!) by 2017. Gilenya crossed that barrier in 2012, and will likely be followed next year by Tasigna, Galvus and Afinitor. We’re not quite sure where another six (or more!) are going to come from, since they’ll (likely) need to replace Diovan, Gleevec and Zometa/Reclast. In addition, some fast-growing products may level out or fall quickly as competition mounts. (We’re looking at you, Gilenya. Sure, you may have blasted through the blockbuster ranks in no time flat as a first-in-class oral treatment for multiple sclerosis, but the arrival of Sanofi’s Aubagio and Biogen Idec’s Tecfidera may take the wind out of your sails.)
Novartis does have a raft of products that it plans to file for registration in the next year-plus, along with label expansions for critical products. Late-stage prospects cover oncology, heart failure, COPD, and an anti-inflammatory biologic that may have some benefits against MS.
In oncology, the company projects that physicians will shift from Gleevec to Tasigna as more data comes in; Novartians contend that Tasigna has a lower risk of progression for chronic myeloid leukemia than Gleevec does, with the implication that it can lead to treatment-free remission in patients. That would be an utter game-changer and would redound to Novartis’ credit.
The company also hopes to see good results from Jakavi, its JAK1/JAK2 inhibitor to treat the blood cancer myelofibrosis. Novartis got Jakavi approved in the EU, Canada and other markets, but licensing partner Incyte has the U.S. rights locked up. Incyte managed $136 million in Jakafi sales in 2012, and $48 million in 1Q13. Novartis saw $35 million in 1Q13 revenues from non-U.S. markets.
Novartis received Breakthrough Therapy designation for a treatment for patients with anaplastic lymphoma kinase positive (ALK+) metastatic non-small cell lung cancer (NSCLC), based on strong Phase I results. Two Phase II trials are ongoing and the company plans to go into Phase III later this year, with a filing as early as 2014, if all goes well.
There are also very high expectations for the company’s daily COPD combo-treatment QVA149. Peak sales estimates run as high as $5.0 billion, if Novartis can get its highest dose approved. One of the two ingredients in QVA149, glycopyrronium bromide, was approved in the EU in October 2012 as the Seebri Breezhaler, a once-daily maintenance dose of COPD.
Novartis made history in November 2012 when it received FDA approval for Flucelvax, the first flu vaccine made by cell culture rather than egg-based manufacturing. The new vaccine, to be made at a facility in NC paid for in part by the U.S. Department of Health and Human Services, should be able to accommodate both seasonal influenza and a pandemic disaster. The company is trying to build up its vaccine portfolio into a profit-making unit.
Novartis suffered a regulatory setback in April 2013 when India’s Supreme Court ruled that Gleevec (imatinib) is not eligible for patent protection in that country. Novartis had received a patent for imatinib in 1993, but the version in Gleevec is a compound that allows for bioavailability. The company argued that the molecule that was patented in 1993 “could not safely be administered to patients and represented only the first step in the process to develop Glivec as a viable treatment for cancer.” It’s a complex case, and not simply a compulsory licensing incident, although the Indian government has complained that the price of a round of treatment of Gleevec is too high.
In June 2013, Novartis began investigating a report that sales reps in India have been artificially inflating sales for Galvus diabetes medication, lying on invoices and using bonus money to buying Galvus from wholesalers, which would registered it as sales.
In other regulatory-legal news, Novartis was charged with colluding with competitors in two European markets — J&J in the Netherlands over generic fantanyl, and Roche in Italy over blocking Avastin in favor of Lucentis — and also got sued twice in four days in April 2013 by the U.S. government over kickbacks — to doctors to prescribe hypertension and diabetes drugs, and to pharmacies to move kidney transplant patients over to its immunosuppressant drug. The physician-related suit includes the charge of a $10,000 dinner for three at famed sushi restaurant Nobu. They should’ve held out for Masa. In November 2012, Novartis paid $20 million to the U.S. and Texas over Medicare fraud charges.
Each of those events (plus the ongoing quality troubles as a number of Novartis and Sandoz sites) sounds bad, but the worst press Novartis got in the past year came when chairman Dan Vasella retired, and Novartis revealed that it would pay him as much as $78 million over six years as part of a non-compete clause.
The press, the Swiss public, and many shareholders went ballistic. Coming in the same year that Novartis posted a sales shortfall and (more importantly) 2,500 layoffs, the package came off as obscene. Within weeks, both parties canceled the clause, even though Dr. Vasella pledged “to make the net amount available for philanthropic activities.”
Novartis has challenges ahead with multiple expirations, but its pipeline is delivering at the right time to see it through.
Lowe Down
As mentioned in my Pfizer writeup, Novartis is confidently spending a bundle on an expanded facility in Cambridge. As the first movers in the “Let’s take Big Pharma to Massachusetts” trend, they can feel proud for having been trendsetters. (Meanwhile, the degree to which New Jersey is emptying out is startling.)
The confidence is apparently justified. Novartis has one of the more wide-ranging drug pipelines in the industry, which is a good thing, since it’s looking at some patent-expiration worries. Nothing at AstraZeneca or Eli Lilly level, you understand (that is, more worrisome than terrifying), but inevitable just the same. The company doesn’t spend much time talking about its strategy to anyone else, so it’s hard to piece together Novartis’ plan to deal with all this. That wide range of drugs includes some prospects in extremely competitive fields, so the company might be looking for areas where there aren’t so many elbows being thrown (the company has mentioned Alzheimer’s as an interest, which is nothing if not wide open). But the wide-open fields got that way for good reasons. There will be some balancing to do . . .
—Derek Lowe
Segments
Novartis makes no noises about splitting up its consolidated structure, although there’s occasional chirping from financial firms that would stand to gain by brokering that sort of split. With the departure of chairman, former chief executive officer, and Alcon-deal architect Dan Vasella, the reasoning goes, it might be time to devolve. But that deal hasn’t been a flop like Merck’s purchase of Schering-Plough, and it doesn’t seem to be a drag on the rest of the company’s performance. (The April 2013 resignation of the chief fiancial officer, Jon Symonds, also added a little fuel to that breakup fire.)
Still, as we do each year, we provide a breakdown of Novartis’ various revenue streams, and where they would each fall within our Top Companies listings.
Pharma: $32.2 billion (would fall to #5, between GSK and AZ)
Alcon: $10.2 billion ($4.0 billion in opthalmic pharmaceuticals would be added to Pharma, pushing Novartis past GSK)
Vaccines/Diagnostics: $1.9 billion (that would be good enough for #8 in our Top Biopharma ranks)
Sandoz (generics): $8.7 billion (good enough to squeeze between Gilead and Mylan for #19 on our list)
Consumer: $3.7 billion (down $900 million from last year, mainly because of those production problems at its Lincoln, NE site)
Qaulity is Jbo #1
Novartis’s total revenues and diversified structure have enabled it to challenge J&J as one of the biggest companies in the industry. The Swiss titan is also challenging J&J for the biggest meltdown of a consumer health manufacturing facility. Novartis’ site in Lincoln, NE went into Operation: Shutdown in December 2011 after a scathing FDA warning letter. Consumer Health sales dropped $900 million in 2012, which the company attributes “mainly” due to the problems at Lincoln.
In April 2013, the company announced plans to lay off 300 workers from the site, and to refocus the facility to process only oral and powdered drugs. The FDA inspected the site in February 2013, and Novartis began shipping an animal health product from the site in April. Novartis has also used some CMOs to produce several of its OTC products until Lincoln gets cleared by the agency. Those products include Excedrin, Lamisil and Triaminic, which resumed shipping in 4Q12.
In January 2013, Novartis recalled 200 lots of Triaminic and Theraflu because their CR caps didn’t work correctly. FDA received a dozen reports of children unscrewing bottle caps. The lots were manufactured before the warning letter in 2011.
Novartis has also been working its way out from warning letters issued in late 2011 to Sandoz sites in Colorado, North Carolina and Canada. The Colorado site was cleared in 4Q12, but another Sandoz facility was cited by FDA in May 2013. That one, in Unterach, Austria, handles parenterals and came over with the $1.2 billion EBEWE purchase in 2009.