The Friday Five – The week in pharma

Big Pharma = Big R&D spend

Fourth-quarter earnings season gained notable momentum this week, with Novartis, Pfizer, Bristol-Myers Squibb, Amgen and Roche all reporting financial results.

R&D expenditure at a number of Big Pharma players increased notably in 2014, as efforts to deliver key drugs to the market intensify. Bristol-Myers Squibb saw its R&D spending expand by 21 percent year-on-year to reach $4.5 billion; an increase that management hopes to see justified by continued leadership of the immuno-oncology market (ViewPoints: Bristol-Myers Squibb's Eliquis, Yervoy impress in Q4, but all eyes remain on Opdivo).

For Novartis, 2015 is poised to be a year of key new drug launches, including the psoriasis treatment Cosentyx and the heart failure therapy LCZ696. Pre-empting this year's focus on the commercial arena, the Swiss company expanded its R&D budget by just 1 percent year-on-year in 2014, but remains one of the sector's biggest spenders at $9.9 billion (ViewPoints: Novartis plans year of key drug launches on back of solid Q4 2014 results).

Roche's pharmaceutical R&D spend grew by 4 percent in 2014 to reach around $8.7 billion, while drug sales grew by 1 percent year-on-year. Cancer revenues expanded by 5 percent versus 2013, but the next 12 months may prove pivotal in determining by what margin the Swiss player retains its leadership of the global oncology market.

Investors will be hoping to see R&D investment translate to impressive clinical data in the immuno-oncology development space, where Roche trails both Bristol-Myers Squibb and Merck & Co; the company hinted during its investor call that it may be in a position to file its PD-L1 inhibitor in non-small-cell lung cancer (NSCLC) later this year, rather than 2016 as analysts are expecting.

Pfizer also saw its R&D budget swell by 9 percent to reach $7.2 billion in 2014, an increase at odds with a recent trend by the company to reduce its expenditure levels. Immuno-oncology is also at the forefront of Pfizer's current development efforts; having spent considerably to in-license Merck KGaA's PD-L1 inhibitor last year, the company expects to initiate 20 studies with the drug this year, six of which will be supportive of registration.

Pfizer's M&A strategy – clear as mud

The key topic of debate during Pfizer's Q4 investor call on Tuesday was, however, the likelihood and potential nature of future M&A activity.

In what direction the company is heading remains unclear. The uncertainty that stems from last year's approach to acquire AstraZeneca – a move some felt was contradictory to the long-standing suggestion from Pfizer that it would break into a number of component companies – remains intact.

More pertinent is the growing sense that Pfizer both wants and needs to implement a large-scale acquisition, despite CEO Ian Read's suggestion that this is not the case (ViewPoints: Pfizer emphasises I/O but investors may get antsy for M&A/BD news). Supporting a bullish outlook for its immuno-oncology capabilities and late-stage pipeline, Read did indicate that any business development opportunities would be primarily focused on generating "near term" shareholder value. Despite legislative changes in the US – which have caused inversion deals to dry to a trickle in recent months – Read also failed to rule out an acquisition that would allow Pfizer to reduce its tax rate.

Pharma's R&D gold-rush

While Pfizer continues to talk up its chances of gaining ground on rivals in the immuno-oncology race, there remains a distinct gold rush mentality in pharma at present as developers seek to gain a foothold in emerging technologies that hold the potential to deliver disruptive innovation.

Exhibit A us the increasingly crowded CAR-T development space; a trend that has increased generalist coverage of this technology and raised the question as to whether the commercial opportunity in this space is aligned with the valuations of those companies which are leading development.

Biogen Idec announced a collaboration with Fondazione Telethon and Ospedale San Raffaele this week, which further swells investment in gene therapy development focused on the treatment of haemophilia, while AstraZeneca became the latest player to invest in CRISPR gene-editing technology. The UK player – which has gained a reputation under CEO Pascal Soriot for investing in novel and highly promising drug-development technologies – is not doing things by half, announcing in a single swoop four collaborations with CRISPR players in both the US and UK.

With some CAR-T players implementing gene-editing technologies as part of their own development efforts, both sectors share some overlap. A potential IP battle looms on the horizon in the CRISPR space, but the biotech bull market continues to run with this technology likely to attract public sector investment in the not too distant future.

Landmark events in the EU biosimilar space

As if to suggest that the US has been hogging the biosimilar limelight in recent weeks (Physician Views Poll Results: Positive FDA sentiment for biosimilar Neupogen shared by oncologists), landmark events are poised to occur in the European biosimilar market over the next few months, focused squarely on the region's first biosimilar antibody product – Celltrion's biosimilar infliximab – which was approved in the region in 2013.

That regulatory decision, notable for granting approval across each of Remicade's indications via extrapolation, allowed the biosimilar to be launched in a swathe of European markets, but not the region's largest territories – France, Germany, Italy, Spain and the UK – due to extended patent exclusivity relating to paediatric indications.

As of next month, this IP barrier will be lowered, allowing Celltrion and its marketing partners to launch biosimilar infliximab in these markets. How the product performs will help to set an early benchmark for broader biosimilar antibody uptake in the region. Roche, for example, reiterated this week that it expects the first biosimilar Herceptin (trastuzumab) products to be available in the region by 2017.

To better ascertain sentiment towards this launch, which is expected to initiate in the next few months, FirstWord polled rheumatologists and gastroenterologists based in the EU5 markets this week - see Physician Views: Let the games begin – Remicade biosimilar free to debut in EU5 markets.

Among the smaller European markets where biosimilar infliximab has launched, Norway has proven to be the biggest success story. Under the national tendering system, biosimilar infliximab was recommended for use in 2014 thanks to a 40 percent discount versus branded Remicade, while the Norwegian Medicines Agency has been seeking to promote biosimilar usage via a well-publicised switching study.

As reported by FirstWord today, Orion Pharma – now responsible for marketing biosimilar infliximab in Norway – has proposed a staggering 72 percent discount for its product for 2015 - see ViewPoints: Orion Pharma offers an "astonishing" 72 percent discount on biosimilar infliximab in Norway, but at what expense to profitability?

Is this the next FDA commissioner?

Duke University cardiologist Robert Califf was named this week as the FDA's deputy commissioner for medical products and tobacco.

Not only will Califf have a broad remit in his role – he will oversee the Center for Drug Evaluation and Research, the Center for Biologics Evaluation and Research, the Center for Devices and Radiological Health and the Centre for Tobacco Products – but he is also being touted as a potential successor to current FDA Commissioner Margaret Hamburg.
Califf, recognised as one of the world's most influential cardiologists, was previously linked with the role of commissioner in 2009 when Hamburg was appointed. He becomes the third person to hold the position of deputy commissioner, a role created by Hamburg in 2011.

Is Califf being positioned as a successor to Hamburg? Speaking to Reuters, Peter Pitts – a former associate director for external affairs at the FDA – cited Califf as "one of the few candidates who could sail through the confirmation process" due to his universally recognised talents. Furthermore, adds Pitts, he "could very easily be the FDA commissioner under any administration."

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