Abbott Labs earnings exceed expectations, but investors unimpressed

Swift sales of medical devices helped propel quarterly revenue and earnings at Abbott Laboratories above expectations, even as revenue from devices with Minnesotaroots like pacemakers and neurostimulators lagged.

Companywide, Abbott’s adjusted earnings of $1.1 billion grew 7 % organically on first-quarter revenue of $7.5 billion. Both the top line revenue figure and the underlying adjusted earnings of 63 cents per share beat stock analysts’ estimates by 2 cents.

Abbott’s medical device division, which absorbed Minnesota’s St. Jude Medical in a 2017 corporate acquisition, recorded an organic growth rate of 9.5 % on $2.9 billion in revenue, making it the largest and fastest-growing division at the Chicago-based company. Strong growth in sales of products for diabetes, electrophysiology, heart failure and structural heart repairs made up for declines seen in heart-rhythm, neuromodulation and vascular devices.

“You know, there’s a geography here or there or a product line here and there that we might not be completely satisfied with. But I think if you look at us, our product areas, even competitors in various spaces in medical devices, this whole sector is doing pretty well,” Abbott CEO Miles White told investors in an earnings call Wednesday. “While we’ve got great pipelines and great products, I think the entire sector has a bright future ahead of it here.”

Despite the earnings and revenue beats, investors sent Abbott shares down more than 4.5 % Wednesday, to close at $72.88. The broader market was also down, with the S&P Health Care Equipment Index down more than 4 %.

Stock analysts pressed White for details Wednesday on why the company wasn’t looking harder at strategic acquisitions and why it didn’t increase Abbott’s financial outlook for the rest of the year.

White pushed back, saying Abbott isn’t seeing any compelling acquisition targets at the moment and prefers to focus on improving the operations it already has; and the company didn’t raise its earnings following first-quarter results because traditionally Abbott executives wait for more clarity on the rest of the year before raising outlooks.

“I’d say the reason that we didn’t look at raising in the first quarter is because I just don’t raise in the first quarter,” White said. “While some analysts have speculated that med tech or med devices is somehow slowing, I tell you, I don’t see that.”

Abbott kept its full-year earnings outlook unchanged, with adjusted diluted EPS in a range between $3.15 and $3.25.

Regarding the company’s key MitraClip device, which is expected to surpass $1 billionin annual sales in coming years, Abbott President and Chief Operating Officer Robert Ford said it will take up to nine months to secure a new Medicare reimbursement code that specifically covers the use of the MitraClip for secondary mitral regurgitation. It could also take a few years to reach the goal of 550 hospitals in the U.S. qualified to implant the device, up from about 350 today.

“Those are some of the key blocks, but I’d say we know how to do this,” Ford said. “We’re not going to wait for final CMS approval before we start hiring.”

Used to repair a leaky mitral valve rather than replacing it with an artificial valve, the MitraClip is part of Abbott’s structural heart business, which had quarterly organic revenue growth of 15 %, to $324 million.

Abbott’s portfolio of products to treat pain with electrical pulses, known as neuromodulation, declined by an organic 7 % in the quarter to $193 million in sales.

White admitted to investors that he overestimated how quickly the neuromodulation business could return double-digit percentage growth, but he remains confident it will happen. Although the sales force is being expanded by 40 to 50 %, that process has been more “disruptive” that expected.

Ford said sales of cardiac-rhythm devices like pacemakers and implantable defibrillators were disappointing in the quarter, especially in the U.S., where $233 million in sales represented an organic decline of 12 %. Overall, worldwide sales of $490 million fell by 5 %.

Ford said the sales team for cardiac-rhythm devices has been refocused into more of a “stand-alone vertical” business unit that should boost sales and accountability, and that future products like a next-generation defibrillator and two leadless heart devices will benefit from the new focus as well.

Analysts with Leerink Partners said the overall performance at Abbott reflected “another solid quarter” and the 2019 guidance targets look achievable. But “we’re less certain of the sources of upside, which we think are critical for stocks to work in this increasingly volatile market environment.”

https://www.marketscreener.com/ABBOTT-LABORATORIES-11506/news/Abbott-Laboratories-Labs-earnings-exceed-expectations-but-investors-unimpressed-28442735/

Canopy Growth nearing deal to buy U.S.-based pot company Acreage Holdings

Canadian marijuana producer Canopy Growth Corp is close to a deal to buy U.S.-based pot firm Acreage Holdings, a source familiar with the matter told Reuters on Wednesday.

The deal is expected to fetch a premium of about 28 percent to Acreage's five-day average trading price - or roughly 25 percent of its closing price on Wednesday, the source said.
The transaction could be announced as soon as later on Wednesday, the source said, but cautioned there is no certainty that the two parties will agree to any deal.
The person asked not to be identified because the matter is still confidential.
Cannabis companies in Canada have been pouring cash into their businesses to fend off competition and develop new products, especially after the country approved the use of recreational marijuana in October. They have also been looking for ways to get into the U.S. market, where cannabis remains federally illegal.
Acreage went public on the Canadian Securities Exchange in November and has licenses or agreements with holders in 19 U.S. states, while also managing a chain of retail stores.
A deal would give Canopy the rights to Acreage's products immediately and set up the two companies with an agreement to exchange stock later on the condition that marijuana becomes federally legal in the United States, the source added.
Based on the purchase agreement, Canopy could lend Acreage parts of their branding and intellectual property in order to penetrate the U.S. market while in turn helping Acreage grow, the source said.
https://www.marketscreener.com/ACREAGE-HOLDINGS-INC-47174348/news/Acreage-Canopy-Growth-nearing-deal-to-buy-U-S-based-pot-company-Acreage-Holdings-28443414/.

Health-Care Stock Rout Deepens Amid Political Pressure

Health-care stocks are trailing the broader market by a historic margin early in 2019, the latest example of how political shifts have buffeted certain sectors.

With another slide Wednesday, the S&P 500 health-care sector is now down 0.9% for the year, compared with a 16% advance for the broader index. If that gap holds through the end of the month, it would mark just the second time since 2000 that an S&P 500 sector has lagged behind by a margin that big in the first four months of the year, according to Dow Jones Market Data.

The largest deficit for health-care stocks previously through April was 7.6 percentage points in 2010. The group is on track to be the index's worst-performing sector at the end of April for the first time since 2006.

Its latest declines have been sparked by a number of signs that politicians on both sides of the aisle are vying for tighter regulations ahead of the 2020 presidential election.

"We've had periods in the past where this has happened, but the intensity and the number of issues that are on the table are more than I've seen in multiple years now," said Ana Gupte, a senior health-care analyst at SVB Leerink.

Insurers have been among the market's worst performers lately amid uncertainty about the future of U.S. health-care policy. So far this year, Cigna Corp. shares are down 23%, while shares of Humana have fallen 19% and UnitedHealth Group Inc., the nation's largest health insurer, has lost 13%.

Democrats in Congress have unveiled plans for a new federally financed health system that would expand Medicare to everyone and overhaul the Affordable Care Act. UnitedHealth Chief Executive David Wichmann argued against so-called Medicare for All and other broad government-coverage plans on the company's earnings call Tuesday, saying they would disrupt health care and hurt Americans' relationships with their doctors.

Shares fell 4% Tuesday even after the company raised its profit guidance for the year and were down another 1.9% Wednesday. The company's market value has dropped by about $53 billion since mid-November.

Meanwhile, the Trump administration is exploring whether to expose the actual cost of care by requiring health-care providers to publicly disclose secret prices they charge insurance companies for services. The White House has also proposed banning certain pharmaceutical-industry rebates in Medicare that would halt billions of dollars in discounts that drugmakers give insurers and companies such as CVS Health Corp.

The combination of policy proposals has hammered health-care stocks, sending the S&P 500 health-care group to its lowest level in three months. After falling 2% Tuesday, the sector shed 2.9% Wednesday to bring its drop so far this month to 6.6%.

"People don't want the extra risk that goes along with being in [health-care stocks] right now because of how quickly things can change, " said JJ Kinahan, chief market strategist at TD Ameritrade.

The recent rout in health-care stocks comes after the Trump administration's stance on tariffs swung materials shares and shares of companies reliant on trade flows with China in recent months. The world's two largest economies have been negotiating for months to end their tariff dispute.

Investors have said they are hesitant to wager on such sectors, particularly when market-leading areas such as technology continue to surge. Another negative for health-care bulls: Some analysts consider the group a safer play because of its stable earnings and relatively hefty dividends.

Assets considered safer have also lagged behind the market this year as the Federal Reserve's cautious stance on raising interest rates pushes investors toward riskier options.

The health-care sector's recent woes mark a sharp departure from 2018, when the group climbed 4.7% as the S&P 500 slipped 6.2%. Bullish investors are hopeful that more upbeat earnings will help share prices stabilize.

But some analysts are skeptical health-care stocks can quickly rebound, with many policy debates expected to continue ahead of the 2020 presidential election.

"It's not something I'm rushing to sell if I'm just looking at the data. Sentiment on the other hand is a problem," said Jeff Garden, chief investment officer at Lido Advisors. Mr. Garden said he has been encouraging clients to hedge positions in health-care stocks using options.

https://www.marketscreener.com/UNITEDHEALTH-GROUP-14750/news/Health-Care-Stock-Rout-Deepens-Amid-Political-Pressure-2nd-Update-28442480/

Lannett Shares Fall After Article Raises Questions Regarding Anti-Trust Lawsuits and Potential Fines

Shares of Philadelphia-based Lannett Company fell nearly 5 percent in trading on Tuesday following the publication of an article on Seeking Alpha alleging the company could go bankrupt due to potential fines related to a multi-state generic drug price-fixing scheme currently under investigation by the federal government.

The article is written by an anonymous poster known as “The Capitolist” who claims he/she is short on Lannett Company stock. The writer lays multiple claims at the feet of the company, including the fact that any potential involvement with the price-fixing scheme being investigated could cause the company to pay exorbitant fines that it could not cover. The amount of the potential fines “would call into question the firm's ability to remain solvent,” the author contends. Then, the author of the article puts forth what he/she asserts is a reasonable methodology of how any fine levied against the company by the state or federal government could impact the generic drugmaker.

The anti-trust investigation into price fixing for generic drugs involves 16 companies, including generic giants like Mylan, Sun, Novartis, Dr. Reddy’s and Teva. The Connecticut attorney general has been leading the investigation. In December, the Washington Post originally reported the probe covers some 300 different generic drugs. The investigation was being led by the office of former Connecticut Attorney General George Jepsen, who completed his term of office in January. As BioSpace reported after the news first broke, executives from the generic drugmakers met regularly to discuss agreements about inflating the price of generic drugs so that every company could profit from the plan.

“Generic drug sales in 2017 were about $104 billion. Specific details of alleged overcharges have not been released, although investigators indicate that with a market that big, even a small percentage of price manipulation could lead to billions of dollars of overcharges,” BioSpace reported in December.

While the original report from the Post does not include Lannett, the Capitolist notes in the article on Seeking Alpha that the Pennsylvania-based company is involved due to unredacted court documents. The documents show there was some level of communication between Lannett and Heritage Pharmaceuticals on price hike agreements for Doxycycline. Two former executives of Heritage have pleaded guilty and are cooperating with the U.S. Department of Justice. The information appears to surround price increases for two Lannett drugs, levothyroxine and Digoxin, both of which saw significant price hikes in 2013 and 2014.

Lannett has publicly addressed the allegations made in the Seeking Alpha article. Shares of the company fell to $7.44 on Tuesday.

Last month, Lannett won approval from the U.S. Food and Drug Administration for a combination of for aspirin and extended-release Dipyridamole, a generic for the blood thinner Aggrenox, which was developed by Boehringer Ingelheim.

https://www.biospace.com/article/lannett-shares-fall-after-article-raises-questions-regarding-anti-trust-lawsuits-and-potential-fines/

Acting Commissioner Ned Sharpless Affirms Commitment to FDA’s Current Course

As Ned Sharpless takes over as acting commissioner of the U.S. Food and Drug Administration (FDA), he is not planning any disruptions or course corrections to the federal regulatory agency.

In remarks to staff on Tuesday, Sharpless, who had been heading up the National Cancer Institute, said he plans to “maintain FDA’s current course of action in every area and proceed full-speed ahead,” according to a statement issued by the FDA.

“So let me reassure you, I am not planning any radical changes from what the FDA has been trying to accomplish,” Sharpless said in his remarks. However, he did add that there will likely be “course adjustments” as new facts appear, but said he walked into an organization “on a good trajectory.”

Sharpless took over the reins of the FDA from Scott Gottlieb, who resigned from the post after two years on the job in order to spend more time with his young family.

Sharpless said the FDA will continue on a mission to increase drug competition and “reign in prescription drug costs” through the generic drug and biosimilar programs that have been established at the agency. Additionally, Sharpless said the FDA under his guidance will continue to do what it can to help streamline the development of new treatments while “ensuring that we maintain FDA’s gold standard of safety and efficacy.”

As acting commissioner, Sharpless, who is well known for his deep understanding of oncology and big data. Said he has a commitment to science-based decision-making and will prioritize the FDA’s efforts to benefit the public health. As an example, Sharpless said he has seen how some charlatans will sell “false hope” to cancer patients and those suffering from other deadly diseases. He said it is important that the FDA continues to stand up for the consumer and expose fraudulent products. Prior to Sharpless taking over at the FDA, the agency issued a number of statements and warnings about the use of unauthorized stem cell products in various treatments.

Sharpless also noted that, while he is fascinated with the groundbreaking work being conducted in biologics, he said it will be important for the FDA to remain vigilant. He said the FDA will not tolerate “dangerous stem cell clinics claiming to treat age-related conditions with highly dubious and unproven cellular products.”

The FDA has also used its authority in recent months to crack down on clinics offering these types of claims. In February, the FDA raised the alarm about clinics using plasma infusions from young donors as a way to help older people maintain a young and healthy look.

One area where Sharpless said he plans to take a lead at the agency is in hiring. He said that in order for the FDA to “remain great and reach its full potential,” then the agency will have to continue to build a “diverse and talented workforce.”

“We need to do this to ensure that we keep up with the scientific and technological changes that have such an impact on the work we do. We will have to do more to recruit and retain the best people and fill the many vacancies, and I have some ideas on this,” Sharpless said.

Promoting the importance of vaccination is also high on Sharpless’ to-do list as acting commissioner. He said he is committed to supporting communications about the efficacy of vaccines to prevent infectious diseases like influenza, HPV, and measles, and to facilitate their broad use.

https://www.biospace.com/article/ned-sharpless-affirms-commitment-to-fda-s-current-course/

Janssen HBV Treatment Licensed From Arrowhead May Be Franchise Keystone

Six months after forging a hepatitis B drug development deal valued at more than $3.7 billion with Arrowhead Pharmaceuticals, Janssen Pharmaceutical presented data that showed its RNA interference (RNAi) therapeutic candidate exhibited robust effects on the liver disease that takes the lives of more than 900,000 people annually.
At the 2019 European Association for the Study of the Liver (EASL) International Liver Congress in Vienna, Austria, Janssen, a division of Johnson & Johnson, and Arrowhead unveiled data from an ongoing Phase I/II clinical study of JNJ-3989. The trial. AROHBV1001 is a double-blind, single dose escalating study in healthy volunteers and open-label, multi-dose escalating study in patients with chronic hepatitis B.
James Merson, Global Therapeutic Area Head for Infectious Diseases at Janssen Research & Development, told BioSpace ahead of the presentation that the data presented at the conference is a key finding. Although the data is still young and faces years of study, Merson said Janssen is highly excited by the findings. He speculated that the data from the study could eventually set the stage for a potential functional cure for HBV, much like HCV has seen with the development of medications like Gilead Science’s Harvoni and Sovaldi.
So far, in the Phase I/II trial, the RNAi product previously known as ARO-HBV targets the hepatitis RNA specifically and stops it making surface antigens, Merson said.
The ongoing Phase II portion of the trial assesses three subcutaneous doses of JNJ-3989 administered weekly to monthly in HBeAg-positive or negative chronic hepatitis B patients. Study data showed the RNAi therapeutics rapidly reduced hepatitis B surface antigen (HBsAg) in patients that had 24 weeks or more of HBsAg assay results to thresholds possibly associated with improved chances of HBsAg seroclearance in many patients, after only three doses. Additionally, JNJ-3989 reduced all measurable viral products, including HBsAg in hepatitis B e-antigen (HBeAg) positive or HBeAg negative patients.
In the presentation, Arrowhead said duration of pharmacologic effect from the asset persisted for more than four months after last dose. Additionally, the companies noted that JNJ-3989 administered subcutaneously was well tolerated at doses up to 400 mg in all chronic hepatitis B patients.
In the trial, 168 total doses, three doses each, were administered to 56 chronic hepatitis B patients. There were no trial dropouts and Arrowhead, which presented the data at the liver conference, said that there were no drug-related serious adverse events (SAE) reported during the trial.
There are between 270 million and 300 million HBV cases across the globe. It is a difficult disease to treat, Merson said. Likening HBV to HIV, current treatment options do not eliminate the source of the viral infection. If you stop taking medication for HBV, the virus will return and the liver disease will continue to progress, he said.
“We want to increase the functional cure rate,” Merson told BioSpace from Austria. “Hepatitis C has been a big success story but this has been fundamentally challenging.”
There is hope that the asset Janssen licensed from Arrowhead will be part of the platform on which J&J plants its flag for hepatitis B treatment. During the liver conference, the two companies said JNJ-3989 “exhibits characteristics desirable for a cornerstone therapy in finite regimens aimed at HBsAg seroclearance in patients with chronic hepatitis B infection.”
Janssen and Arrowhead made multiple presentations at the liver conference and the hope is that one or more of these will become weapons against this disease. With the liver conference having come to a close, Merson said Janssen’s next step will be to work out which of the molecules in the pipeline will be able to be combined to “give a high cure.” While he said the company wants to see those high cure rates, it will take work and years of research to determine how high of a cure rate can be achieved. Merson said in its arsenal against HBV, Janssen has multiple assets, which means the company has multiple shots on goal.
“That will be our focus in the coming years,” Merson said.
https://www.biospace.com/article/inside-look-janssen-s-hbv-asset-licensed-from-arrowhead-could-become-treatment-franchise-cornerstone/

UnitedHealth price target lowered to $300 from $330 at SunTrust

SunTrust analyst David MacDonald lowered his price target on UnitedHealth to $300 to reflect the compression in market multiples but also keeps his Buy rating on the company after the company’s Q1 results that were “marked by solid core trends across both divisions and a well managed medical cost trend.” The analyst notes that the industry concerns around Medicare for America and Affordable Care Act programs are weighing on the stock, but he sees “structural changes to the model as quite low” and remains “bullish” on the shares. MacDonald adds that UnitedHealth’s free cash flows remain “robust”, capital deployment opportunities are “plentiful” and its “valuation risk/reward is compelling.”

https://thefly.com/landingPageNews.php?id=2893641