07.19.09
#4 Novartis
Lichtstrasse 35, CH-4056, Basel, Switzerland
Tel: (41) 61324 1111 Fax: (41) 61324 8001
www.novartis.com
Headcount | 96,717 | |
Year Established | 1996 | |
Pharma Revenues | $35,647 | +9% |
Total Revenues | $41,459 | +4% |
Net Income | $8,233 | -31% |
R&D Budget | $7,217 | +12% |
2008 Top Selling Drugs | |||
Drug | Indication | Sales | (+/-%) |
Diovan | hypertension | $5,740 | +15% |
Gleevec | chronic myeloid leukemia | $3,670 | +20% |
Zometa | bone metastasis | $1,382 | +7% |
Femara | breast cancer | $1,129 | +20% |
Sandostatin group | acromegaly | $1,123 | +9% |
Neoral | immunosuppression | $956 | +1% |
Lucentis | age-related macular degeneration | $886 | +125% |
Exelon | Alzheimer's disease | $815 | +29% |
Voltaren | inflammation/pain | $814 | +9% |
Lescol | cholesterol | $645 | -3% |
Exjade | iron chelation | $531 | +49% |
Comtan | Parkinson's disease | $502 | +20% |
Account for 65% of total pharma sales, up from 61% in 2007.
PROFILE
In a recent BusinessWeek profile, Novartis chairman and chief executive officer Dan Vasella explained that the company was trying to upend its R&D model, pursuing drugs that are “backed by proven science.” The key example was Gleevec, which was initially approved for a rare blood cancer, and subsequently proved effective against other types. Gleevec has gone on to become Novartis’ #2 seller.
The Lowe Down
Novartis has been positioning itself as The Science-Based Drug Company for several years now. It’s a rare profile of the business (or of its management) that doesn’t go on for a couple of paragraphs about all the spadework in genomics and disease pathways that’s been going on there. Rare diseases, move to Cambridge, hiring outsiders — you’ve read the articles, too. As a Science-Based Guy myself, I find a lot of that admirable. I just hope it works So far, we can at least say that it isn’t not working. Novartis has been holding up pretty well, despite some setbacks. It’s those setbacks that worry a person, because if there’s one thing that you can be sure of in this business, it’s that time and chance happeneth to them all. The danger in talking up how advanced your technology has become is that you might start to believe your own press releases. Novartis is going to have to guard against that. I think that they can manage (all they have to do is ask themselves how their DPP-IV inhibitor is doing). But if they forget that being cutting-edge isn’t enough by itself, trouble will ensue.—Derek Lowe |
One of the drugs cited in the BW article, Ilaris, received approved in June 2009 for treatment of Cryopyrin-Associated Periodic Syndromes (CAPS), which includes the very rare (as in, a few thousand people worldwide) Muckle-Wells Syn-drome. Ilaris is also in trials for systemic juvenile idiopathic arthritis, gout, chronic obstructive pulmonary disorder and type 2 diabetes.
Now, contra that article, I don’t think it’s exactly revolutionary to get drugs approved for niche indications, then expand them into more lucrative ones as more trial data becomes available. I mean, I know ankylosing spondylitis can be a serious condition, but it seemed a little odd to me that TNF-alpha inhibitor after TNF-alpha inhibitor targeted that indication as their entrée to the U.S. market. It made more sense once they got sBLAs approved for tougher indications (with bigger patient bases) like RA, psoriatic arthritis, etc. The one company that comes to mind for championing treatments that target very rare diseases and likely can’t be expanded into larger markets is Genzyme, which has done a great job with that narrow focus.
As I’ve pointed out ad infinitum: the bigger the company, the more it needs blockbusters.
(The only guy I can think of who ever said the opposite was NBC TV’s co-chairman of programming, Ben Silverman, who told reporters in July 2008 that his network was now “managing for margins, not ratings.” It was refreshing to hear an executive be that blunt, but he didn’t exactly inspire confidence in NBC’s fall lineup. He went on to greenlight the remake of Knight Rider.)
Acquisition News
Target: Speedel Holding Ltd. Price: $880 million Announced: July 2008 What they said: “With the integration of Speedel into Novartis, we can accelerate development of Tekturna/ Rasilez, particularly in combination with other medicines, and further advance Speedel’s pipeline of novel compounds.”—Joseph Jimenez, CEO of Novartis Pharma AG Target: Nektar Therapeutics (pulmonary business) Price: $115 million Announced: October 2008 What they said: “Through our existing collaborations, we have a high regard for the Nektar team and for their technologies, and these capabilities will play an important role in developing our respiratory pipeline.”—Joseph Jimenez Target: EBEWE Pharma (specialty injectable generics, not neurological products) Price: $1.2 billion Announced: May 2009 What they said: “The addition of EBEWE Pharma’s leading portfolio of oncology medicines fits our strategy and improves our ability to help cancer patients around the world by providing easier access to therapies.”—Dr. Daniel Vasella, chairman and CEO of Novartis |
That’s not to say I’m down on Novartis’ pipeline. Top-seller Diovan will lose patent protection in 2012 (and face generic erosion when Merck’s Cozaar goes off patent in 2010), so the company has to be happy that it has a slew of new drugs, combo-products and vaccines reaching the U.S. market: Ilaris, Reclast, Afinitor, Ixiaro, Exforge HCT, and Coartem.
Further, while 1Q09 was nothing to write home about, Novartis did see a 94% increase (in local currencies) from several of its recently launched drugs in that span, with Lucentis, Exelon patch, Exforge and others contributing $872 million in revenues. The Pharma division posted sales gains of 3% in the quarter, which sounds good when compared to Vaccines & Diagnostics (-12%), Sandoz (-9%) and Consumer Health (-11%).
Despite those ugly short-term results, I don’t disagree with Novartis’ strategy of diversification. Every pharma company on this list is trying to branch out in ways the will enable it to weather the challenges to its main business. And everyone (especially the foreign-based companies) had a rough 1Q09.
That said, I mentioned last year that Novartis’ multi-stage acquisition of Alcon Inc. worried me a bit. It wasn’t just that Novartis spent $11 billion for a 25% stake in the eye care company in April 2008. It was that the agreement gave Alcon’s parent, Nestle, the option to compel Novartis to buy another 52% of the company for approximately $25 billion between January 2010 and July 2011.
At the time of the agreement, perhaps the price was warranted, but as Alcon’s share price has plummeted (along with the market overall), it’s now an albatross for Novartis, which must keep cash on hand in case Nestle decides to exercise the option (Novartis has its own option to buy the shares, but the share price is much higher than on the open market). So, while its peers are completing mega-acquisitions, Novartis may have to wait on the sidelines, unless it can renegotiate the deal with Nestle.
That hasn’t stopped Novartis from making some strategic pickups in the past year. The largest one was the May 2009 $1.2 billion purchase of the specialty generic injectables business EBEWE Pharma. The unit markets a number of generic oncology treatments, and will slot right into Sandoz. Announcing the deal, Novartis pointed out that the global generic injectables was between $10 and $12 billion in 2008, and that oncology accounted for 30% of that. Further, $9 billion in injectable oncology drugs will fall off-patent by 2015.
Generics, as I pointed out in this month’s From the Editor column, are helping reshape the historic model of what a pharma company is. Novartis has given itself a head start in this process with its Sandoz unit, which brought in $7.5 billion in 2008. Sandoz has also managed to get its third follow-on biologic approved in the EU with filgrastim, a Neupogen biosimilar, cleared for takeoff in February 2009. When the U.S. Congress reaches a compromise on a pathway for FOBs, Novartis/Sandoz will have a head start on the competition.
Of course, just because a facility is manufacturing generics and not innovative products, that doesn’t mean it can slack on quality. In August 2008, Novartis received a warning letter from the FDA in relation to quality at a Sandoz manufacturing site in Wilson, NC. The letter followed up a 483 letter that the site received in April 2008, after the agency found problems with the site’s Toprol XL generics. Novartis mentioned the investigation as part of the reason for Sandoz’ sales shortfall in 1Q09, and pointed out that “[m]ajor initiatives are also underway to return Sandoz . . . to higher growth rates and profitability.”
Novartis has some issues to settle, while it tries to negotiate a somewhat different path than its peers through the patent minefield. Most importantly it’ll need to work around its oversized commitment to Alcon, and get some of its new releases producing enough cash that it can survive the pending Diovan Drop-off.