Pharma firms face shake-up with China’s plan to bulk-buy drugs

• Pilot programme involves major cities clubbing together to purchase certain medicines, driving down prices
• Chinese companies that have invested heavily in R&D stand best chance of survival

China’s plan to drive down generic drug prices through a centralised bulk procurement programme is set to redraw the industry by forcing its thousands of small generic drug makers to streamline and consolidate after decades of enjoying outsized profit margins.

“There won’t be a second act for traditional generic drug makers in China,” said Dai Ming, Shanghai-based fund manager at Hengsheng Asset Management.

“In the past, there was hope that these companies would benefit from more government investment in health care due to the ageing population, but now these health care stocks will be further hurt by policy and undergo a greater correction.”

To survive the shifting landscape and rely less on generics – drugs whose patents have expired – many companies are scrambling to pump money into research and development.

Discovering a new medicine allows companies to earn high profits for as long as the new drug is covered by a patent, balancing out the loss of revenue from the fall in generic drug prices.

Chinese companies had been in a sweet spot. Among the top 100 generic drug makers, Chinese firms had a 74 per cent gross margin and an 18 per cent profit margin in the third quarter, compared with a global average of 55 per cent and 9.5 per cent, respectively, according to data compiled by Bloomberg.

The privileged position was due to the quirks of China’s regulatory system. While multinational giants had to wait years for approval to import their new drugs, the domestic generic makers could do a thriving business in copying, testing and getting local permission for the medicines.

At the same time, the industry benefited because of the lack of a centralised system for quality control. Multinationals like Pfizer and AstraZeneca could win more hospital tenders for their off-patent drugs, as they could more easily offer quality assurances for their higher-cost medicines. That kept prices elevated throughout the pharmaceutical sector.

Now, China has embarked on a pilot programme in which major cities bulk-buy certain drugs together, forcing companies to bid for contracts and driving down prices by an average of 52 per cent, one by as much as 90 per cent. Last week, Chinese Vice-Premier Sun Chunlan said China would be expanding the programme to cover more cities and drugs, as medicine prices must fall for health care to be affordable for the people.

Chinese companies that are already heavily invested in research and development (R&D) stand the best chance of surviving the new landscape. Among mainland shares, Jiangsu Hengrui Medicine has invested the most in research by far, amounting to 16 per cent of revenue in the latest quarter.

Guangzhou-based Yipinhong Pharmaceutical is in second place with 8.4 per cent. Zhejiang Jingxin Pharmaceutical, Chengdu Kanghong Pharmaceutical Group and Tianjin Lisheng Pharmaceutical have invested about 8 per cent of sales into research.

Among Hong Kong-traded shares, CSPC Pharmaceutical Group has 8.14 per cent of sales invested in research and Sino Biopharmaceutical has 6.23 per cent.

At present, Jiangsu Hengrui gets 20 per cent of its revenue from novel drugs and 80 per cent from generics, a ratio it wants to flip, according to Lianshan Zhang, its president of global R&D.

But a successful novel drug can take decades to develop, and the Chinese pharmaceuticals are up against the deep pockets and research talent of the multinationals, who are now enjoying rapid approval from Chinese regulators for their new medicine.

And since their investment funds came from revenue generated by generics, the plunge in prices might set off a vicious circle, analysts said.

“With generic drug revenue being compressed, there’s a chance that it can’t cover the necessary investment to transition to novel drugs,” Huarong Securities analyst Zhang Keran said. “The market does worry whether or not there will be sustainable cash flow going forward.”

https://www.scmp.com/news/china/society/article/2180378/chinas-new-drug-procurement-plan-set-hit-its-pharma-firms-profit

Prana Biotechnology gains on raising US$31.4M

Prana Biotechnology (NASDAQ:PRAN) has entered into a securities purchase agreement with Life Biosciences LLC to raise up to ~A$44.5M (~US$31.4M).

Life Biosciences will initially invest US$7.5M (~A$10.6M), with the agreement allowing Prana to raise an additional US$2M. A further amount of up to ~US$21.9M (~A$31M) would be invested by Life Biosciences and other investors on exercise of short-term warrants being issued as part of the transaction.

The transaction involves an issue of ~272M new fully paid ordinary shares in the capital of Prana. The Ordinary Shares would be issued at A$0.0390 (3.9 cents) and the Warrants would have an exercise price of A$0.0450 (4.5 cents).

https://seekingalpha.com/news/3419973-prana-biotechnology-plus-84-percent-raising-us-31_4m

Pharmacies to Stop Selling Tobacco Products Citywide in January

The New York City Health Department announced today that cigarettes and other tobacco products will be banned from sale in all pharmacies across the five boroughs, including supermarkets and big-box stores with a pharmacy section, come January 1.

The policy is part of Mayor de Blasio’s package of bills, signed into law in 2017, aimed at reducing tobacco use among New Yorkers—something the city reports still causes 12,000 deaths each year.

While smoking rates have declined, more than 860,000 adults and 13,000 youth still smoke in New York City, putting themselves at risk of stroke, diabetes, heart disease, lung disease and several types of cancer, the health department said.

“Tobacco use remains of one of the leading causes of preventable death in New York City, and reducing its availability is key to protecting the health of New Yorkers,” said Dr. Herminia Palacio, Deputy Mayor for Health and Human Services, in a statement. “People trust pharmacies to help them stay well—they should be helping smokers quit, not the opposite.”

National drugstore magnate CVS voluntarily stopped selling tobacco products in 2015, and was soon joined by several independent pharmacies. About 500 pharmacies across the city, however, still sell tobacco.

The new policy is predicted to reduce the number of smokers in New York City by 160,000 over the next three years by cutting the number of cigarette retailers in half, said Council Member Brad Lander.

“Strong evidence shows that just being exposed to nearby tobacco retailers make kids twice as likely to smoke,” Lander said.

The tobacco ban follows legislation that banned e-cigarette sales in pharmacies, which went into effect in August 2017, and other signed laws meant to curb tobacco use, like the price hike on tobacco products and a cap on the number of tobacco retailers citywide.

Cigarettes and tobacco products can only be sold in the city with a valid tobacco retail dealer license. Selling these products with a license is a misdemeanor, and those caught selling without a valid license two times in three years can see their stores temporarily closed.

https://ridgewoodpost.com/pharmacies-to-stop-selling-tobacco-products-citywide-in-january

AVEO to Present TIVO-3 Data at the 2019 ASCO Genitourinary Cancers Symposium

AVEO Oncology (NASDAQ: AVEO) today announced that data from the Phase 3 TIVO-3 study of tivozanib (FOTIVDA^®) versus sorafenib in refractory advanced or metastatic renal cell carcinoma (RCC) will be presented during an oral session at the 2019 American Society of Clinical Oncology (ASCO) Genitourinary (GU) Cancers Symposium being held February 14-16, 2019 in San Francisco.

Presentation Details

Title: TIVO-3: A phase III, randomized, controlled, multicenter, open-label study to compare tivozanib to sorafenib in subjects with refractory advanced renal cell carcinoma (RCC)
Presenter: Brian Rini, MD, Cleveland Clinic Lerner College of Medicine of Case Western Reserve University
Abstract Number: 541
Session Title: General Session 8: Evolving Management of Metastatic Renal Cell Carcinoma
Data and Time: February 16, 2019, 10:00 a.m.-11:30 a.m. PT

https://www.marketscreener.com/AVEO-PHARMACEUTICALS-INC-6030038/news/AVEO-Oncology-to-Present-TIVO-3-Data-at-the-2019-ASCO-Genitourinary-Cancers-Symposium-27813560/

Sanofi Unloads Programs to Acer Therapeutics and MyoKardia

Acer Therapeutics, headquartered in Newton, Mass., in-licensed osanetant, a clinical-stage, selective, non-peptide tachykinin NK3 receptor antagonist from Paris-based Sanofi.

Financial details were not disclosed. Acer plans to start development of osanetant for specific but unannounced neuroendocrine-related disorders.

Acer focuses on buying, developing and commercializing drugs for serious rare and ultra-rare diseases. It currently has two late-stage pipeline candidates. Edsivo (celiprolol) is being developed for vascular Ehlers-Danlos syndrome (vEDS) and ACER-001, which is a fully taste-masked, immediate release formulation of sodium phenylbutyrate. ACER-001 is being developed for urea cycle disorders (UCD) and Maple Syrup Urine Disease (MSUD).

In the summer of 2017, Acer went public via a reverse merger with Opexa Therapeutics, based in Texas. Opexa laid off all but two of its 20 staffers after its lead compound for multiple sclerosis failed a mid-stage clinical trial in October 2016. Under that deal, Acer received a $15.7 million financing round led by TVM Capital.

The company submitted its New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) on October 29, 2018 for Edsivo for vEDS. The company also requested Priority Review.

eVDA is the most severe form of a group of diseases of the connective tissue called Ehlers-Danlos Syndrome (EDS). Patients with vEDS suffer from life-threatening arterial dissections and ruptures, in addition to ruptures of the intestines and uterus. The average mortality is 51 years of age.

On December 26, 2018, the FDA accepted the NDA for review and gave it a target action date of June 25, 2019.

“The acceptance of our NDA for Edsivo is an important step in our efforts to help patients with vEDS, who suffer with a devastating disease that currently has no approved treatment,” stated William Andrews, Acer’s chief medical officer. “We have had the honor of learning about the significant challenges of living with vEDS directly from patients and their families. This has in large part driven the hard work, passion and complete dedication that our small team has given to this effort, and we will continue to do so as the FDA reviews our NDA for Edsivo. We are excited about the possibility of making Edsivo available in the U.S. for patients in the near future.”

Sanofi originally tried to develop osanentant for schizophrenia, but failed in the attempt. It abandoned the efforts in August 2005. Other possible applications were for drug addiction, because it blocked the effects of cocaine in animal models. Other possible indications include depression and visceral pain.

Chris Schelling, Acer’s founder and chief executive officer, stated, “We are thrilled to expand our pipeline of product candidates by in-licensing the global rights to osanetant. The drug perfectly fits Acer’s acquisition and development model of de-risked assets—it already has robust non-clinical, pharmacokinetic and human safety data, and based on recent studies involving antagonism of the NK3 receptor, we believe it can be successfully repurposed to treat a variety of neuroendocrine disorders. We very much appreciate the opportunity to expand our relationship with Sanofi.”

In related news, MyoKardia announced it had regained global rights to all the programs it had inked with Sanofi. The research deal ended on December 31, 2018, and will effectively conclude in its entirety on April 1, 2019.

MyoKardia gains all rights to programs in the portfolio, including to mavacamten and MYK-491. They launched the collaboration in 2014 to advance up to three programs through discovery and into the clinic for the treatment of hypertrophic cardiomyopathy (HCM) and dilated cardiomyopathy (DCM).

During that period, Sanofi paid MyoKardia about $230 million in funding, and mavacamten advanced from preclinical studies into a late-stage trial for HCM, and MYK-491 from discovery to a Phase II proof-of-concept trial in DCM.

“We are grateful for Sanofi’s support over the past four years in what was a highly productive relationship,” stated Tassos Gianakakos, MyoKardia’s chief executive officer. “Since entering into the collaboration, MyoKardia has become a leading research and development organization with a robust pipeline of targeted cardiovascular therapeutics. Regaining worldwide rights enables us to capture the full value of the data being generated in the next 12-24 month as we prepare for the potential registration of mavacamten in obstructive hypertrophic cardiomyopathy and obtain proof-of-concept for MYK-491 in patients with dilated cardiomyopathy. Importantly, consolidated control over our entire portfolio allows us to make decisions about how we advance each of our therapeutic candidates in alignment with our precision medicine approach.”

https://www.biospace.com/article/sanofi-unloads-various-programs-to-acer-therapeutics-and-myokardia/

Smith & Nephew downgraded to Neutral from Overweight at JPMorgan

JPMorgan analyst David Adlington downgraded Smith & Nephew to Neutral and lowered his price target for the shares to GBP 14.77 from GBP 14.87. The analyst sees a more balanced risk/reward following the recent performance of the shares.

https://thefly.com/landingPageNews.php?id=2842284

Piper calls Wright Medical top 2019 pick in Medical Technology and Devices

After interviewing industry contacts to get a sense of the orthopedic outlook for 2019, Piper Jaffray analyst Matt O’Brien believes the category will be “largely steady” with “solid” volume growth and even more extremities and sports medicine growth. The group as a whole “is cheap” with respect to valuation, which makes us optimistic, O’Brien tells investors in a research note. The analyst’s top pick for next year is Wright Medical (WMGI) as he expects the company to continue taking share in healthy extremities end markets and views the stock’s current valuation as attractive. For large caps, O’Brien believes Stryker (SYK) will continue to be in a share taking position, “making it a clean story for investors to get behind.”

https://thefly.com/landingPageNews.php?id=2842295