Tuesday, April 2, 2019
Biopharma in Mass. Expanding Aided by Tax Incentive Financing
It’s not a secret to say that tax incentives play a significant role in a municipality’s ability to attract new businesses. In Massachusetts, a state with a heavy biotech presence, tax incentives have been able to help small towns compete with large biotech and pharma hubs, like Cambridge.
Three Bay State communities, Westborough, Marlborough and Hopkinton, each used Tax Increment Financing (TIF) plans to lure medtech Olympus Corporation, Candela Corporation and Lykan Biosciences to the different communities, according to the Worcester Business Journal.
Westborough was able to land Olympus Corp. following a tax-increment financing deal that is estimated to save the company $774,000 in taxes, the Journal reported. The company will begin work on its new facility this summer as it looks to consolidate its offices near the Boston area, the Journal said. The Westborough site is located near major highways and a commuter train stop, which will benefit workers being shifted from Littleton and Southborough, the Journal said.
In December, Olympus won approval from the U.S. Food and Drug Administration for its Spiration Valve System (SVS) for the treatment of severe emphysema, a progressive form of Chronic Obstructive Pulmonary Disease. The SVS was granted priority review status by the FDA because it is intended to treat a life-threatening or irreversibly debilitating disease or condition and offers significant, clinically meaningful advantages over existing legally marketed alternatives, the company said.
More recently, Olympus received a national recognition of sorts after its Orbeye video microscope appeared on an episode of ABC’s “Grey’s Anatomy” in January.
Marlborough, which is home to Boston Scientific and Sunovion, used a TIF agreement to lure Candela, a global medical aesthetic device company, from its corporate headquarters based in Maynard, Mass., the Journal said. The TIF is valued at nearly $280,000 and that is coupled with state Economic Development Incentive Program investment tax credits of $500,000, the Journalnoted. Candela, which rebranded itself in March from Syneron Candela, will move 200 employees to the new location and will also hire another 100 employees in Marlborough, the Journal said. Candela will take over 50,000 square feet of a 160,000 square-foot building formerly occupied by Verizon.
Phoenix-based Lykan Bioscience will benefit from a 10-year TIF deal as it will create a new manufacturing center in the town of Hopkinton. The company will invest $12 million in the community and hire about 125 people, the Journal said.
AveXis Acquires Col. Manufacturing Facility Ahead of May FDA Date for Med
Nearly six weeks after announcing plans to expand a facility in North Carolina, Novartis subsidiary AveXis plans to acquire a manufacturing facility in Longmont, Colorado to provide additional production capacity for its planned launch of Zolgensma, a gene therapy treatment for spinal muscular atrophy.
In its announcement Monday, AveXis said the Colorado facility will become the largest of the four sites involved in manufacturing its gene therapy treatments for SMA, as well as other planned treatment in development for rare genetic diseases. In addition to the N.C. site, which is expanding, and the planned Colorado site, AveXis also has manufacturing facilities in Illinois and San Diego. The Longmont campus will provide an additional 700,000 square feet of space for biologic drug manufacturing, offices, laboratories, warehousing and utilities. Initial start-up activities in Longmont will include preparing the facility for scaling, manufacturing and testing of gene therapies and hiring about 150 employees. AveXis said it plans to offer positions to the employees currently working at the facility and will announce additional job expansion in the future – presumably, after the U.S. Food and Drug Administration gives its final decision on AVXS-101, now dubbed Zolgensma, a gene therapy to treat Spinal Muscular Atrophy (SMA) Type 1. The regulatory agency is set to make a decision on the gene therapy in May. AveXis did not disclose the name of the current manufacturing site owner.
Andrew Knudten, senior vice president of global strategic operations for AveXis, said the Colorado site, along with its three other manufacturing facilities, will play a significant role in helping the company meet the need of patients.
“We have built a team with exceptional depth of experience, unified by a common mission: to positively impact the lives of patients and families devastated by rare and life-threatening neurological genetic diseases. We are eager to add the talented team in Longmont to AveXis, and we hope that they will choose to join us as we build world-leading manufacturing capabilities in gene therapy,” Knudten said in a statement.
AveXis did not disclose the financial details of the acquisition of the Colorado manufacturing facility. But, the company did say that the Longmont campus investment adds to existing $115 million investment in Durham facility that was announced in February.
AveXis has rapidly expanded its manufacturing in anticipation of a potential FDA approval of Zolgensma. Dave Lennon, company president, said by the end of 2019, AveXis will have created more than 1,000 high-tech biologics manufacturing jobs to help it deliver its gene therapies. Also, the additional manufacturing staff will provide AveXis the “flexibility to enter into multiple external partnerships as the development and manufacturing partner of choice in gene therapy,” Lennon said.
AveXis was acquired by Novartis for $8.7 billion in 2018. When Zolgensma was granted Priority Review by the FDA, the price point for the treatment, which could be a “one-and-done” procedure, was pegged between $4 and $5 million. Despite the multi-million cost of the one-and-done treatment, the Boston-based nonprofit organization Institute for Clinical and Economic Review has actually pegged Zolgensma as more cost effective than the only SMA treatment on the market, Biogen’s Spinraza, which requires annual injections that have a price tag of $375,000 per year.
Amazon’s use of HSAs opening doors for new solutions to out-of-pocket expenses
Amazon’s recent announcement that it will be accepting health savings account (HSA) cards for medical supplies sold on its e-commerce site marked a big step for the company’s evolving role in the healthcare space and may also push more consumers to take an interest in HSAs.
In addition, retail-meets-healthcare platforms such as this one represent the growing collaboration of private insurance plans and consumers in paying for out-of-pocket expenses, experts say.
Lisa Zamosky, senior director of communications at eHealth.com, said during the Affordable Care Act’s last open enrollment period, 23% of people who do not receive government ACA subsidies selected HSA-eligible plans at eHealth—that figure has been pretty stable at eHealth for several years. But on a broader scale, that number is even more dramatic, with enrollment growing fourfold between 2007 and 2017, Zamosky told FierceHealthcare.
“More than half of all employees in the U.S. have a high deductible health plan, meaning they are eligible for an HSA. The problem is that HSAs are still widely misunderstood and underutilized by consumers,” David Vivero, founder and CEO of digital health company Amino, told FierceHealthcare. “By accepting HSA dollars, Amazon is not only giving consumers across the country more options to save on medical expenses, but also hopefully exposing more consumers to the unparalleled benefits of this great healthcare savings tool.”
As consumers’ cost-sharing in healthcare has gone up, financial concerns for medical expenses now outrank concerns for mortgages, taxes and unemployment.
Steve Auerbach, CEO of Alegeus, says Amazon’s move into healthcare may prove to be a great example of industry consolidation with the goal of making shopping for healthcare as easy as other retail purchases.
And, if any brand can bring awareness and popularity to HSAs, it’s Amazon. The e-commerce giant already has a loyal consumer base and a convenient online platform, the experts said. Plus, with an increased emphasis on consumer data as a tool for personalization, Amazon will have a front seat to collecting valuable information.
One of the main challenges with HSAs, which Vivero says Amazon can help with, is the confusion for consumers around which purchases are HSA eligible. Amazon already lends itself to an easy space for defining which products are eligible for HSA purchase right there on the screen.
But HSAs can be used for a long list of qualifying medical expenses, including copays and deductibles, some first aid supplies and over the counter medicines, prescription glasses and contacts, dental services, maternity supplies and fertility treatments, and lots more.
There are other challenges to understanding the platform, too. For example, seven in 10 consumers mistakenly think their HSA is governed by a “use it or lose it” policy like an FSA.
And while some people are weary of calling participants healthcare “consumers,” Vivero believes there is no other way to look at it. Kaiser Family Foundation data show deductibles have risen eight times faster than wages, forcing people to make tough choices about healthcare.
“If you have a high deductible health plan, your HSA is your best tool for saving money on healthcare expenses because it is triple tax-advantaged,” Vivero said. “You can contribute pre-tax dollars, grow those dollars via tax-free investment, and pay for eligible items tax-free as well. The HSA is actually the most tax-advantaged savings account in the country.”
Vivero does warn that consumers generally don’t contribute enough to their HSA and that if they have the means, they should “max out” their HSA—or even better, invest it and grow the HSA dollars tax-free.
“Unfortunately, some people who buy HSA-eligible plans for themselves and their families underfund their health savings account. Some, in fact, never get around to opening an account, and so totally miss out on the benefits of an HSA,” Zamosky said.
According to the Aite Group, out-of-pocket healthcare spending in 2018 was predicted to be $371 billion. Yet, that same report indicates that only $86.3 billion of that spending would flow through tax-advantaged benefit accounts. Auerbach notes that assuming an average tax rate of 30%, consumers left nearly $85 billion in tax savings unclaimed last year.
So, what does the future hold for HSAs and healthcare consumerism?
Auerbach believes that Amazon’s emergence is just the latest example of how consumer-driven healthcare continues to grow in popularity. And as the healthcare market continues its focus on driving affordability and financial responsibility, other big retailers will make similar moves.
Plus, he says, industry consolidation and simplification will continue to merge business models between care delivery, insurance and funding.
“While many of the current acquisitions and partnerships will provide access to two-out-of-three of these pillars, the real winners will be those that can integrate all three, resulting in unchartered integration and simplification within the healthcare industry,” Auerbach said.
And while no one can predict the political future, Zamosky says that an all-public healthcare system seems unlikely.
“The U.S. has a long history of successful public private partnerships in healthcare, as in other fields, and it seems this is likely the way forward as well,” she said. “Experience shows us that public/private collaboration like what we see with the very successful and growing Medicare Advantage program is often appealing and of great benefit to American healthcare consumers.”
And Zamosky suspects HSAs will remain an important part of healthcare benefits. There have been proposals in recent years to broaden their use by eliminating certain restrictions on the accounts and raising the maximum tax-free contribution—but that will take bipartisan legislation.
Auerbach agrees that consumer-driven healthcare will continue to be a powerful tool to help address the crisis in the U.S. healthcare system. According to Mercer, 72% of large employers will offer a consumer-driven health plan in 2019, compared with 20% a decade ago.
“The success of CDH in reversing the cost trend—together with the recent rise in HSA adoption—confirms that CDH will continue to thrive into the future,” Auerbach said.
However, he warns that for the consumer-driven market to continue its growth in the coming years, there needs to be major improvements in the consumer experience. He notes account solutions need to be even more personalized with the help of technologies such as artificial intelligence and machine learning.
“CDH providers are now ready to arm employers and consumers with the smart tools they need to maximize value and utility. As consumers continue to take increased financial responsibility for their healthcare journeys, demand for an improved user experience will only grow,” he added.
ADMA Biologics receives Department of Health and Human Services U.S. license
ADMA Biologics, Inc. announced that the U.S. Food and Drug Administration has issued a Department of Health and Human Services U.S. license No. 2019 to the company in connection with the approval of ASCENIV Immune Globulin Intravenous, Human – slra 10% Liquid. The license covers the Boca Raton, FL manufacturing facility which has demonstrated compliance with FDA requirements as well as authorizes ADMA to manufacture and enter into interstate commerce with ASCENIV.
Dr Reddy to sell, assign US dermatology brands rights to Encore Dermatology
Dr. Reddy’s Laboratories Limited (BSE: 500124, NSE: DRREDDY, NYSE: RDY, along with its subsidiaries together referred to as “Dr. Reddy’s”), through its wholly owned subsidiary Promius Pharma, LLC, announces the sale of its rights for SERNIVO®(betamethasone dipropionate) Spray, 0.05% and assignment of its rights to market and distribute, PROMISEB®Topical Cream and TRIANEX®0.05% (Triamcinolone Acetonide Ointment, USP) in the United States, to Encore Dermatology.
Under the terms of the agreement, Promius Pharma is eligible to receive an upfront payment and future milestone payments contingent upon achievement of certain commercial objectives.
“This is in line with our renewed strategy to enable us achieve self-sustainability and profitable growth for each of our businesses,” said G.V. Prasad, Co-Chairman and CEO, Dr. Reddy’s.
Natus Medical announces accretive sale of Medix business
Natus Medical announced that it has signed a definitive agreement to sell its wholly-owned subsidiary, Medix Medical Devices, SRL, in an employee led buyout. As part of this divestiture, Natus will sell the Medix line of products, including incubators, warmers and other Medix products. Under its new ownership, Medix will continue to distribute Medix products as well as the previously distributed line of Natus products and other third party products in Argentina and Venezuela. Medix will also provide ongoing customer service, sales and customer support, and warranty and repair services for the Medix line of products.”This divestiture is an important step toward refocusing our business on our core products and investing in the markets we expect to grow in the future,” said Jonathan A. Kennedy, President and CEO of Natus. “We remain committed to the markets we serve, and will ensure a smooth and orderly transition for our customers and employees.” The Medix business generated $7.6M of revenue in 2018 and was expected to contribute approximately $6M to 2019 revenue. The divestiture of Medix is expected to be accretive to Natus’ operating income margin going forward. We anticipate incurring $3M to $4M of transaction and disposal expenses as part of the divestiture. We will update full year revenue guidance with the impact of this divestiture in our Q1 2019 earnings release.
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