Appaloosa steps up pressure on Allergan to split chairman, CEO roles

Hedge fund Appaloosa LP on Tuesday urged pharmaceutical company Allergan Plc to split its chairman and chief executive roles, arguing that an independent chair could help CEO Brent Saunders boost the company’s sagging share price.

Appaloosa’s billionaire founder David Tepper turned up the heat on the Botox maker one week after the company delivered disappointing earnings and shelved plans to sell its women’s health business, which it had put on the block in May.

“In the wake of last Tuesday’s earnings call … it should by now be readily apparent to all interested and responsible parties that Allergan requires a fresh approach,” Tepper wrote in a letter made public on Tuesday.

“We believed that the introduction of a seasoned independent Chairman with extensive pharmaceutical experience could exert a favorable influence on executive decision-making,” the letter said.

Allergan’s shares have fallen nearly 30 percent since October and are trading at less than half their historic high of more than $330 hit in 2015. On Tuesday, they were up 1.6 percent at $140.09.

The company undertook a review of its corporate strategy last year, but the result of that review may only be the sale of its relatively small infectious diseases unit and a commitment to remain disciplined in its spending.

Allergan said it had received the Appaloosa proposal and is “committed to continuing to engage with them.” The company also said it is committed to strong governance practices and independent board leadership, and touted its pipeline of products in development.

Appaloosa, which oversees $12 billion, began pressuring Allergan to separate the roles, both currently held by Saunders, and to recruit an outsider to oversee its board in 2018. Tepper said that this is the fourth time he has written to the board to request this change.

Allergan’s “moribund corporate performance and flagging stock price since our letters only deepens our conviction on this point,” Tepper wrote. He also said splitting the roles is not a controversial move.

At the end of the third quarter, Appaloosa owned nearly 2 million Allergan shares, having cut its holdings by 41 percent, a regulatory filing shows.

Last year, both Appaloosa and Senator Investment Group wrote to Allergan urging the company’s board to split the chairman and chief executive role and reconsider its acquisition strategy.

Analysts said that Allergan’s disappointing earnings report last week made it vulnerable to more activist pressure.

https://www.marketscreener.com/ALLERGAN-PLC-22497284/news/Allergan-Appaloosa-steps-up-pressure-on-Allergan-to-split-chairman-CEO-roles-27966276/

Analysts Focus On Gilead’s Late-Stage Data Readouts Following Mixed Q4

Gilead Sciences, Inc. GILD 3.4%, which focuses on antiviral drugs, reported below-consensus fourth-quarter earnings per share Monday, sending its shares down.

The Analysts

Raymond James analyst Steven Seedhouse reiterated a Strong Buy rating on the shares of Gilead and trimmed the price target from $92 to $90.

Bank of America Merrill Lynch analyst Ying Huang reiterated a Neutral rating and upped the price target from $73 to $76.

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Wells Fargo Securities analyst Jim Birchenough maintained an Overweight rating and reduced the price target from $95 to $89.

Morgan Stanley’s Matthew Harrison maintained an Equal-weight rating and nudged the price target down from $84 to $83.

Citigroup analyst Robyn Karnauskas reiterated a Buy rating and lowered the price target from $106 to $100.

Raymond James: Near-Term Focus On Phase 3 Readouts

Gilead’s Q4 results, including above-consensus sales of Biktarvy and Truvada, were predictable, but the product revenue guidance for 2019, which indicates a year-over-year decline at the midpoint, was “confusing,” Seedhouse said in a Tuesday note.

The conservative guidance may have to do with the company’s intention of not allowing new CEO Daniel O’Day to miss on guidance, the analyst said.

The near-term focus for the pharma stock will be on five Phase 3 readouts on NASH, filgotinib and Descovy, Seedhouse said.

“Gilead is communicating quite the long term (five-year) roadmap for selonsertib, a drug most expect to fail.”

Raymond James is above consensus, assuming a 60-percent probability of success for the pipeline candidate for treating NASH fibrosis.

If the NASH candidate works, Seedhouse said it expects the shares to get re-rated, with the downside to the stock being limited and temporary.

BofA Looks To M&A, New CEO’s Strategy

Gilead’s Q4 revenue beat was orchestrated by its HIV franchise and a lack of generic competition for Letairis, BofA’s Huang said. EPS fell short of expectations due to higher operating expenditures, the analyst said.

The Phase 3 results for NASH candidate selonsertib in F3 and F4 NASH patients, due in Q1 and Q2, respectively, should be taken with a grain of salt due to the small size of the trial and the lack of a placebo, Huang said.

BofA noted that Gilead is focused on M&A and partnerships, and said it awaits a strategy from the new CEO, who assumes office March 1.

Wells Fargo: Pipeline Success, Aggressive Product Development Are Key

With potential headwinds to its base HIV/HCV business, Gilead’s pipeline success and aggressive business development are key, Birchenough said in a note.

Gilead is due to release Phase 3 data from two separate studies, STELLAR 3 and STELLAR 4 in NASH with F3 and F4 fibrosis in the first half of the year. The company suggested that filing on a single study’s success would have to be discussed with FDA, the analyst said.

Wells Fargo views the risk-reward as favorable ahead of the Phase 3 NASH data.

Morgan Stanley: Risk-Reward Skew Positive In Near-Term

Investors are likely to be disappointed by Gilead’s flat revenue guidance, poor EPS performance and the significant ramp in 2019 SG&A, Morgan Stanley’s Harrison said.

The Trump administration’s quest to halt HIV transmission by 2030, as reported by Washington Post, is likely to improve investor perception of the longer-term health of Gilead’s HIV portfolio, especially PrEP (prophylaxis treatment), the analyst said.

“With investors assigning little to no credit for NASH and modest value for filgotinib in RA, we believe the risk-reward for GILD is skewed to the positive in the near-term.”

The firm, however, remains on the sidelines given its lack of conviction in the NASH market opportunity, but said it expects the shares to rally on positive data.

Citi: Transformational Deals Needed To Beat Generics

Gilead’s 2019 guidance, which assumes double-digit year-over-year growth for the HIV portfolio and HCV stabilization, could be the base for growth, Citi’s Karnauskas said.

The 18-percent growth in HIV portfolio in Q4 was due to strong demand for Truvada, with more than 200,000 individuals on PrEP, the analyst added.

The analyst views cell therapies to be a growth area, with Yescarta sales expected to double in 2019.

Citi sees the potential for M&A, with late-stage assets boosting the topline.

“In our view, more advanced assets or more transformational deals will be needed for growth to help offset generic competition in base biz,” Karnauskas said.

https://www.benzinga.com/analyst-ratings/analyst-color/19/02/13102496/analysts-focus-on-gileads-late-stage-data-readouts-foll

Gilead drops anti-BCMA CAR-T from Kite, takes $820M charge

Buried in among Gilead’s fourth-quarter results statement is a line revealing it has abandoned an anti-BCMA cell therapy for multiple myeloma, part of its $12 billion acquisition of Kite Pharma.

The failed KITE-585 program and other costs associated with the acquisition resulted in a whopping $820 million impairment charge in the quarter and add to analyst speculation that with sales of approved CAR-T Yescarta still disappointing, Gilead may have to write down the value of the Kite deal entirely, according to a Bloomberg report.

Gilead’s decision to drop the KITE-585 CAR-T program reflects the increasing competition in the anti-BCMA category and doesn’t come out of the blue. The company said at the J.P. Morgan conference (JPM) last month that it would only press ahead with development of KITE-585 if its profile was very compelling.

“We realized that our 585 program doesn’t have the depth … or durability of response to really allow us to put forward a best-in-class product, so we probably won’t take that forward,” said Gilead’s chief scientific officer John McHutchison at JPM.

Other anti-BCMA candidates are well out in front, including Bluebird/Celgene’s anti-BCMA CAR-T bb2121, which is currently leading the field with new data presented at the American Society of Hematology (ASH) conference in December. The parts also have a longer-acting follow-up (bb21217) already in the clinic.

Meanwhile, ASH heard clinical trial readouts for more than 10 anti-BCMA regimens based on autologous CAR-T, off-the-shelf or allogeneic CAR-T, bispecific antibodies and antibody-drug conjugates, all of which are further along in development than KITE-585.

The crowded field explains why Gilead took the decision to ax its program but coupled with Yescarta’s sluggish uptake—described as “steady and measured” on the fourth-quarter results call—it is starting to make the Kite deal look increasingly like an expensive gamble. And of course, Gilead has also signed several other deals to shore up its cell therapy technology, adding to its outlay on CAR-T.

The CAR-T troubles will be an immediate challenge for Gilead’s new CEO Daniel O’Day, due to take over on March 1 after an acknowledged “trough year” for the biotech stemming from steep declines in hepatitis C virus drug sales and more competition in the HIV category.

Gilead’s commercial operations head Laura Hamill said on the call that the firm is nevertheless hoping for a near-doubling in Yescarta sales this year as it extends the number of centers offering the therapy in the U.S. and continues its rollout in Europe.

Yescarta brought in $264 million in 2018 as a whole, but its fourth-quarter tally of $81 million was only $6 million ahead of its third-quarter sales. Gilead reckons it can add another $200 million in sales this year, according to Hamill.

https://www.fiercebiotech.com/biotech/gilead-drops-anti-bcma-car-t-from-kite-takes-820m-charge

Gilead executives predict patience—and some deal scouting—from new CEO

What can Gilead investors expect to see from incoming CEO Daniel O’Day? Patience, but also more deal hunting, according to the big biotech’s executives.

When former Roche pharma chief O’Day—who’s slated to join Gilead on March 1—makes his entrance, “he’s going to take his time to get to know the company,” Gregg Alton, Gilead’s interim CEO, said on the drugmaker’s fourth-quarter conference call.

“Certainly he will … put his own mark on where he wants to take the company,” but “I think he’s going to be thoughtful and make sure he’s really understanding what we’re doing,” Alton said, adding that he expects O’Day to “be patient.”

O’Day will enter at an uncertain time for Gilead, whose declining hepatitis C revenues and slow start for CAR-T drug Yescarta have thrown doubt on whether the company can return to growth this year. Some analysts on the call seemed puzzled by Gilead’s guidance, which laid out 2019 product sales of $21.3 billion to $21.8 billion—potentially less than the $21.7 billion the company pulled in this year.

“Our first guidance of this year does include downside risk,” but Gilead is “very focused” on reversing the growth trend in 2019 and executives “really believe that’s achievable,” CFO Robin Washington told investors.

Of course, the company is hoping O’Day’s commercial oncology expertise will come in handy when it comes to pumping up CAR-T med Yescarta, whose $264 million in 2018 sales Gilead predicts could double this year.

But it may still have to turn to M&A to make that growth wish come true. As Washington told investors, “we continue to look for deals with commercial assets” as well as pipeline assets, and “we’ll continue to focus in this area as Dan joins us.”

Meanwhile, Gilead’s HIV franchise is decidedly on the right track for the California company, which pulled in $4.1 billion in fourth-quarter HIV sales to top Wall Street’s expectations. Overall, for the period, Gilead churned out $5.7 billion in sales and posted earnings per share of $1.44, taking a 31-cent hit from a $410 million write-down on raw materials for hepatitis C medication Harvoni.

https://www.fiercepharma.com/pharma/gilead-execs-predict-patience-and-some-deal-scouting-from-new-ceo-o-day

Genentech Plans Legal Battle to Protect Esbriet from Generic Competition

Genentech, a Roche company, is flexing its litigation muscle this week. The South San Francisco-based company has filed 18 lawsuits over the past few weeks to block competitors from selling a generic version of a treatment for idiopathic pulmonary fibrosis, a fatal lung-scarring disease.

Genentech’s treatment, Esbriet, was brought into the company’s pipeline in 2014 after Roche acquired Brisbane, Calif.-based InterMune, the company that developed the drug in an $8.3 billion deal. Esbriet was approved by the U.S. Food and Drug Administration (FDA) two months after the acquisition was announced.

At the time of the approval, Esbriet was estimated to have a potential patient population of about 100,000 people in the United States. Idiopathic pulmonary fibrosis (IPF) is a fatal disease caused by progressive scarring of the lungs, which makes breathing difficult and prevents the heart, muscles and vital organs from receiving enough oxygen to work properly. The disease can advance quickly or slowly, but eventually, the lungs will harden and stop working altogether. There is no known cure for IPF. The median survival time from diagnosis is two to five years, and the five-year survival rate is approximately 20 to 40 percent, Genentech said in a statement.

Genentech reaped the rewards of InterMune’s 12 years of research that went into the regulatory approval. Esbriet is expected to top $1 billion in sales for 2018, according to the San Francisco Business Times, which first reported the multiple lawsuits. Esbriet, as the Times noted, has patent protection until 2021. But, other companies are lining up to challenge the drug’s blockbuster status. The Times reported that at least 18 generic drugmakers, most of which are based in India, filed Abbreviated New Drug Applications with the FDA to piggyback off of Esbriet’s clinical data and seek quick approval of a generic version. Not all of the companies are from India. There are some well-known generics drugmakers in the mix too, including Sandoz, a Novartiscompany, and Israel-based Teva Pharmaceuticals.

Genentech is doing what it can to protect revenues generated by Esbriet, which has an annual wholesale price of about $100,000. The only other approved therapy for IPF is Boehringer-Ingelheim’s Ofev.

Esbriet, which was approved under Breakthrough Therapy Designation, inhibits with the production of Transforming Growth Factor-beta, a small protein in the body involved in how cells grow and Tumor Necrosis Factor (TNF)-alpha, a small protein that is involved in inflammation.

At the same time Genentech is looking to protect Esbriet, this morning the company struck an agreement with Xencor, Inc. to develop and commercialize novel IL-15 cytokine therapeutics, including XmAb24306. XmAb24306 is an IL-15/IL-15Rα cytokine complex engineered with Xencor’s bispecific Fc domain and Xtend Fc technology and is Xencor’s most advanced preclinical cytokine program.

James Sabry, global head of pharma partnering at Roche, said the company believes cytokine therapy will play an important role in the treatment of a wide range of diseases, including cancer

“This collaboration with Xencor will further enhance our understanding of a critical immune activation pathway and may present a potential new way to use the immune system to target cancer,” Sabry said in a statement.

Under terms of the agreement, Genentech will pay Xencor $120 million upfront, and Xencor will be eligible to receive up to $160 million in development milestones for the XmAb24306 program, as well as up to $180 million in development milestones for each new IL-15 drug candidate.

Genentech also said today that the FDA is reviewing a supplemental Biologics License Application submitted by Genentech for Kadcyla as adjuvant (after surgery) treatment for people with HER2-positive early breast cancer (EBC) with residual disease after neoadjuvant (before surgery) treatment. The FDA granted Kadcyla Breakthrough Therapy Designation for this indication, which is designed to expedite the development and review of medicines intended to treat serious or life-threatening diseases.

https://www.biospace.com/article/genentech-plans-legal-battle-to-protect-esbriet-from-generic-competition/

Merck: FDA accepts for review regulatory filings for two antibacterial agents

Merck announced that the U.S. FDA has accepted for review regulatory filings for two antibacterial agents. These filings are: (1) a NDA accepted for Priority Review for the combination of relebactam, the company’s investigational beta-lactamase inhibitor, with imipenem/cilastatin, for the treatment of complicated urinary tract infections and complicated intra-abdominal infections caused by certain susceptible Gram-negative bacteria, in adults with limited or no alternative therapies available; and (2) a sNDA accepted for Priority Review for ZERBAXA to treat adult patients with nosocomial pneumonia, including ventilator-associated pneumonia caused by certain susceptible Gram-negative microorganisms. The Prescription Drug User Fee Act target action date for IMI/REL is July 16, 2019, while the PDUFA target action date for ZERBAXA is June 3, 2019.

https://thefly.com/landingPageNews.php?id=2858909

InflaRx price target raised to $65 from $42 at JPMorgan

JPMorgan analyst Anupam Rama raised his price target for InflaRx to $65 from $42 ahead of the Phase 2b Shine study of IFX-1 In hidradenitis suppurativa. The data readout, expected in Q2, “largely remains an under the radar catalyst,” Rama tells investors in a research note. The analyst continues to believe the Shine study has a high probability of success and the potential to be a “transformational catalyst” for InflaRx shares. Rama sees share upside potential from the readout ranging from 60% to 150%-plus versus downside in the 40%-55% range. He reiterates InflaRx as a top pick for the first half of 2019 and keeps an Overweight rating on the name.

https://thefly.com/landingPageNews.php?id=2858913