#3 - Novartis
Lichtstrasse 35, CH-4056
Tel: (41) 61324 1111
Fax: (41) 61324 8001
|2009 Top Selling Drugs|
|Gleevec||chronic myeloid leukemia||$3,944||+7%|
|Lucentis||age-related macular degeneration||$1,232||+39%|
|Voltaren||inflammation / pain||$797||-2%|
Account for 53% of total pharma sales, up from 52% in 2008.
Novartis managed to reach #3 in this year’s ranks partly because of organic revenue growth, partly because of H1N1 vaccine sales, and partly because the depreciating value of the GBP walloped Glaxo’s results. Unlike Roche, its neighbor in Basel, Novartis reports its financials in dollars rather than Swiss francs, so I have to trust that they’re weighing exchange rates accurately. When it comes to money, of course, you can trust the Swiss.
Regardless, Novartis managed significant growth in a year in which its competitors were flat or in decline; its 8% uptick in 2009 revenues outstripped every other company in the top 12. Diovan, with its patent protection running out in the U.S. in 2012, topped the $6 billion mark in 2009 revenues. With Merck’s Cozaar going generic this year, there’s little chance Diovan will reach that number again.
The Lowe Down
Novartis has, in many ways, been the least dramatic place to work in this business for the last few years. Considering all the thunder, lightning, rains of live frogs and swarms of locusts around, that’s certainly meant as a compliment. They’re one the few places that hasn’t announced toe-curling mass layoffs, although I wonder if they’ve been quietly shedding staff through attrition or something. [Novartis added more than 3,000 people to its headcount from the end of 2008 to the end of 2009. —Ed.]
But they’re not immune, because no one is. Just as some years ago the Swiss research operations looked on nervously as the company expanded in the U.S., now the U.S. folks watch as China develops. You can’t help but wonder if the Chinese will be looking over their shoulders in 10 or 15 years themselves, at the rate things are changing over there. (I’m not sure whose footsteps they’ll be listening for, though).
The company has some very large bets down in oncology and metabolic disease, but it’s going to be a while before some of these things emerge into the regulatory light, if they ever do. Fingolimod could be the near-term news: the revenge of the small molecules in a therapeutic area dominated by biologics. Is it a one-off or the start of a trend?—Derek Lowe
In addition to Diovan, Novartis will soon face generic pressure on Femara and the LAR version of Sandostatin. In addition, Amgen’s Prolia may take a chunk out of sales of Zometa.
How is the Swiss behemoth responding to these challenges? By combining heavy-duty R&D with bold M&A! As with all the other companies on this list, Novartis is preparing for a different pharma reality. There are still swing-for-the-fences blockbusters in its pipeline, but the company continues to diversify radically in an attempt at weathering the patent cliff with a varied base of related units.
In January 2010, Novartis took the plunge and decide to acquire control of Alcon, the eye care company, that it began buying from Nestle in April 2008. At that time, Novartis bought 25% of Alcon for $10.4 billion, and exercised its option to buy another 52% for $28.1 billion in January. With 77% of the company under its control, it can conduct an all-share direct merger for the remainder, bringing the total cost to around $50 billion. Alcon will help Novartis continue its diversification drive, adding more than $6 billion in annual sales in non-overlapping areas while also expanding the company’s reach in emerging regions. The deal’s expected to close by the end of 2010.
Novartis also engaged in a reorganization of its global and U.S. structures during 2010. In January, the company laid out its succession plan, in which Dan Vasella will hold onto his chairmanship but step down as chief executive officer, to be replaced by Joe Jimenez, who served as CEO of Novartis Pharma AG. Mr. Jimenez’ role was assumed by David Epstein, who was previously head of Novartis Oncology, the group that launched Gleevec. The company also eliminated the roles of heads of corporate affairs, group quality and technical operations.
Target: Zhejiang Tianyuan (vaccine company)
Price: $125 million for 85% stake
Announced: November 2009
What they said: “Our future activities with Tianyuan are an important step in our strategy to enhance the prevention of diseases in China with high-quality products.” —Dr. Daniel Vasella, chairman of Novartis
Target: Corthera Inc.
Price: $120 million, plus $500 million in possible milestones
Announced: December 2009
What they said: “Relaxin is expected to further strengthen the position of Novartis and its extensive range of cardiovascular medicines and development portfolio.” —company statement
Price: $38.5 billion for 77% share
Announced: January 2010
What they said: “The addition of Alcon will strategically strengthen our healthcare portfolio and our position in eye care, a sector with dynamic growth due to the increasing patient needs of an aging population.” —Dr. Vasella
Target: Oriel Therapeutics
Price: not disclosed
Announced: April 2010
What they said: “Oriel is a strong strategic fit with Sandoz and the acquisition is expected to support our strategy of increasing the number of differentiated, higher-value products in our development pipeline.” —Jeff George, Division Head Sandoz
That executive reorg preceded a U.S. restructuring in April 2010, in which the company’s U.S. pharma chief executive stepped aside and the company established several new units. Novartis created three U.S. specialty businesses: Multiple Sclerosis, Respiratory/ Transplant/Infectious Diseases and Psychiatry/Neuroscience. The company also devolved its primary care unit into four regional units. In all, Novartis shed 383 full-time positions with the moves, mainly HQ-based jobs. I hope they’re divided evenly by gender; Novartis lost a sex-bias case in May brought by former female employees in the U.S., and got hit with $250 million in punitive damages in the case, which involved 12 plaintiffs, and may face as much as $1 billion in compensatory charges in the 5,600-woman class part of the case.
Faced with the prospect of losing its CV cornerstone, Novartis is looking to build new franchises, not just add cash-generating businesses. In August 2009, the company gained FDA approval of Extavia, the first treatment in its new MS portfolio. Extavia is similar to Bayer’s Betaseron, but Novartis is also close to getting approval for Gilenia, a game-changer in the MS field. Gilenia, which was recommended for approval in June 2010, would be the first oral MS treatment on the market, passing Merck’s cladribine. Analyst expectations for Gilenia range from $1 billion to $3.5 billion, especially since the drug was recommended for first-line treatment.
In addition to that potential blockbuster, Novartis got expanded U.S. approval for Tasigna in June 2010. A head-to-head Phase III trial showed the drug’s superiority over Gleevec, Novartis’ #2 seller, in chronic myeloid leukemia. The company plans to make as many as five regulatory submissions for oncology compounds in 2010, including expanded indications for Afinitor, which was approved for renal cell cancer in March 2009.
In the meantime, Novartis’ Sandoz unit is poised to build a biosimilars franchise, having received EU approval for its third biosimilar, Zarzio, a version of Amgen’s Neupogen. In 2009, Omnitrope recombinant human growth hormone became the first biosimilar approved in Canada and Japan. Overall, the generics unit was flat in 2009, but jumped 16% in 1Q10 as the company integrated sales from its acquisition of EBEWE’s specialty generics business.
Moreover, the company’s experience and scale in the generics marketplace gives it a significant advantage over competitors who are just now trying to jump into generics. I have a feeling some of those newcomers will discover it’s not as easy as they thought.
In October 2009, Novartis spent $200 million to acquire U.S./Canada rights to a schizophrenia drug called Fanapt from Vanda Pharmaceuticals. Make that “RE-acquire”; Novartis owned the rights to the drug in development from 1997 until 2004. It was approved in the U.S. in May 2009, after bouncing from Hoechst to Titan Pharma to Novartis to Vanda, picking up a Not Approvable letter along the way. Vanda persevered with the drug, and is now poised to receive milestones and royalties for it.
The first quarter also brought in another $1.1 billion in H1N1 vaccine sales. More importantly, the vaccine unit got a significant approval during 1Q10, as both the U.S. and EU approved Menveo meningitis vaccine for ages 11+. In May 2010, the company submitted an sBLA to the FDA to get the age range expanded to two years and up. Analysts project annual sales from $650 million to more than $1 billion, depending on how many indications it can gain. It’s closest competitor, Sanofi-Aventis’ Menactra, posted $621 million in 2009 revenues.
Maybe I’m being optimistic, but Novartis looks like it’s positioned itself to ride the next three years of rough seas in relative security. Sure, it’s not going to replace $6 billion in Diovan sales right away, but the company has managed to de-emphasize prescription pharma without devaluing its R&D.
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