Search This Blog

Wednesday, July 17, 2019

Medical Distributors Stocks Fall After Opioid Data Reports

Shares of medical distributors and other health-care companies took a hit on Wednesday, and their pain may not be short-lived.
AmerisourceBergen Corp. fell 4%, while Cardinal Health, Inc. shed 3.8%. McKesson Corp. lost about 2.7% in recent trading. All three performed worse than the broader U.S. stock market on Wednesday, which recorded small declines.
Their declines come after news reports revealed new government data on information about opioid sales and distribution before 2013.
Wednesday’s drop puts a pause on solid performance for the medical distributors so far this year.
AmerisourceBergen has gained 14.8% in 2019, while McKesson is up 26%. Cardinal has edged higher about 1% this year.
Other pharmaceutical companies have also had a rough week. CVS Health Corp. and Walgreens Boots Alliance Inc. simultaneously fell on Wednesday.
Morgan Stanley downgraded pharmaceutical companies Teva Pharmaceutical Industries Ltd. and Endo International PLC to “underweight” earlier this week, saying that they are exposed to opioid litigation. Teva lost 6.3% on Wednesday while Endo fell about 3.1%. Shares of both have lost more than 50% this year.
“Opioid litigation is just getting started. There are thousands of lawsuits, and we see the potential for negative litigation developments over the next few years,” wrote Morgan Stanley analysts in a note on Monday.

Abbvie hopes to turn around the fortunes of Sting

Continued interest in the Sting pathway might come as a surprise, though secrecy suggests that asset prices are failing.
If Abbvie had revealed how much it paid to acquire Mavupharma yesterday investors would have had a neat way to compare the changing value of assets working on the once highly promising Sting pathway.
As it is they will just have to guess. What cannot be denied, however, is that like many immuno-oncology strategies Sting is not all it was once cracked up to be. That said, Abbvie clearly sees continued promise here, and it must be assumed that it was able to access this at a more realistic price than Bristol-Myers Squibb and Novartis had had to pay a few years ago.
Mavupharma had been launched two years ago with $20m in series A financing from Frazier Healthcare Partners and Alpine Bioventures. Earlier this year it selected the oral project MAVU-104 as its lead Sting pathway enhancer, saying it planned to file an IND for it this year.
Yesterday Abbvie took that decision out of Mavupharma’s hands by acquiring it outright without disclosing anything about the deal’s terms.
Industry watchers will recall that only a month ago Takeda, which separately has an in-house Sting agonist, TAK-676, licensed Curadev’s CRD5500, a small-molecule Sting activator said to be amenable to development as an antibody-drug conjugate. The value of that deal, too, was kept under wraps.
Why the secrecy? After all, just a few years ago Stings were all the rage: in 2015 Novartis paid $225m to get its hands on Aduro’s pipeline just before that group went public, and two years later Bristol handed over $300m up front for IFM Therapeutics, which like Mavupharma was privately held and whose most advanced assets were preclinical.
SELECTED PROJECTS ACTIVATING THE STING PATHWAY
ProjectCompanyStatusNote
ADU-S100Novartis/AduroPhase II2015 deal ($200m cash + $25m equity); disappointed at Asco 2019
MK-1454Merck & CoPhase IDisappointed at Esmo 2018
BMS-986301Bristol-Myers Squibb (ex IFM)Phase I2017 acquisition for $300m; presented at SITC 2018
SB 11285Spring Bank PharmaceuticalsPreclinicalIV, intratumoural; separately developing analogues/ADCs
TAK-676TakedaPreclinical
MAVU-104Abbvie (ex Mavupharma)Preclinical2019 acquisition (undisclosed terms); oral ENPP1 inhibitor
exoSTINGCodiak BiosciencesPreclinicalEngineered exosome; early data at SITC 2018
CRD5500Takeda/CuradevPreclinical2019 deal (undisclosed terms); small molecule
VTX-001Venn TherapeuticsPreclinicalNo longer appears in company pipeline
UnnamedHitgenPreclinical2017 research collaboration with Aduro
TTI-10001TrilliumPreclinicalPresented at AACR 2019
SYNB1891SynlogicPreclinical
UnnamedNimbus TherapeuticsPreclinicalSmall molecule
UnnamedBicycle TherapeuticsPreclinicalBicycle conjugate
Perhaps the reason is that in the meantime Sting targeting has underwhelmed. Last October’s Esmo conference saw Merck & Co’s MK-1454 generate zero remissions in monotherapy, and only a 25% ORR in combination with Keytruda – with none in any PD-(L)1 refractory subjects.
And at this year’s Asco meeting Aduro/Novartis’s ADU-S100 combined with spartalizumab found responses in just five of 57 evaluable subjects, when some analysts had wanted to see an ORR 20-30% higher than that achieved with anti-PD-(L)1 therapy alone. Aduro is today worth 96% less than when it floated in 2015.
Against this backdrop some might ask why there is perceived value in stimulating Sting, which broadly speaking primes T cells and boosts immune response. But pharma is still desperate to find ways of broadening the anticancer activity of checkpoint blockade, and Abbvie is among the most willing current dealmakers.
It must also be borne in mind that there is more than one way to hit the Sting pathway, and the failure of one mechanism need not necessarily spell the end of all others. Mavupharma’s approach has been to inhibit ENPP1, an enzyme that it says negatively regulates Sting.
However much Sting has underwhelmed it cannot be declared dead yet, and Abbvie will be hoping to have got itself a bargain.

Neon shines, but larger trials needed to illuminate full effect

Neon’s cancer vaccine makes a decent early showing, but overall survival remain a crucial measure.
If Neon Therapeutics was to receive a report card for the results of its phase Ib trial for novel neoantigen cancer vaccine, NEO-PV-1, the comment might read something like: “Good start, needs to keep up the hard work”.
The crucial point for Neon, which today reported results of the 82-patient study in patients with advanced or metastatic melanoma, NSCLC and bladder cancer, was the validation of its technology platform. Until now many in the market had been wary of attributing much, if any, value to the novel immunotherapy approach.
Neoantigens are proteins that occur only in cancer cells, owing to genetic mutations, making them ideal targets for cancer treatments. Neon’s vaccine NEO-PV-1 directs the immune system towards these neoantigens, and today it looked as if the approach might have legs.
Today’s results were from a trial that tested the project in combination with Opdivo, and improvements in progression-free survival were seen across all three tumour types. In 27 patients with metastatic NSCLC and 21 patients with bladder cancer, PFS reached 5.6 months in both groups. More impressively, in 34 patients with metastatic melanoma patients, median PFS had not been reached after 13.4-months of follow up.
Hold your horses
Given that these are very sick patients who at the start of the trial had been through at least one and sometimes three previous lines of therapy, the results look impressive, particularly in melanoma.
But it should be remembered that this remains a small, single-arm study, while the inclusion of Opdivo means that it is hard to determine the exact benefits of NEO-PV-1. Moreover, no figure for overall survival, the industry gold standard measure, was reported, and questions were also asked about the overall response rate in some of the study arms – particularly among NSCLC patients, where there were a relatively high number of dropouts.
Investors, while not exactly piling in, saw enough in the results to start placing bets on the treatment approach, with Neon shares moving up 5% in early market trading.
Moving on
The results do at least give Neon the confidence to move into phase II. Today the group said it would be initiating a randomised phase II clinical trial of NEO-PV-1 in combination with a checkpoint inhibitor trial in metastatic melanoma.
This larger trial should answer some of the questions about the vaccine’s ongoing efficacy and duration of effect, and also explore some of the theories the group has about a potential cascading immune response triggered by the vaccine. This could get round the ever-present problem of tumour resistance.
Neon is also sensibly hedging its bets on the checkpoint inhibitor front with a study looking at NEO-PV-1 in combination with Keytruda.
Given pharma’s hunger for novel cancer targets, Neon is likely to stay in the spotlight for some time to come. Though its relatively small market cap of $129m suggests that many remain to be convinced about the company’s technology.

After Earnings Beat, Wall Street Talks Johnson & Johnson Litigation Risk

Johnson & Johnson JNJ 0.29% shares are down 2% since the company reported a second-quarter earnings beat on Tuesday morning.
Johnson & Johnson reported a 42% increase in net profit in the quarter. Revenue of $20.56 billion was down 1.3% from a year ago but also topped consensus analyst estimates of $20.29 billion. The company also reiterated its full-year earnings guidance and raised its sales forecast, but investors seem increasingly concerned about the potential negative impacts of opioid and talc litigation.
Several analysts have weighed in on Johnson & Johnson since the report. Here’s a sampling of what they had to say.

Near-Term Litigation Risk

Wells Fargo analyst Larry Biegelsen said the opioid overhang could be settled by the end of 2019, but talc litigation could drag on.
“The Daubert hearing in the talc case scheduled to start on 7/22 may give some sense of the strength of the case for the plaintiffs and defendant (JNJ) and thus offer some visibility on how many of these cases (85% of talc cases could be affected by the Daubert hearing) could move forward,” Biegelsen wrote in a note.
Bank of America analyst Bob Hopkins said results were slightly better than expected thanks to strong international pharma growth and less generic headwinds.
“Until we get more clarity on some of the litigation facing JNJ, we expect the stock to remain range-bound,” Hopkins wrote.

Underlying Value

Morgan Stanley analyst David Lewis said an acceleration in the pharma market heading into 2020 would typically be a bullish catalyst, but the stock performance is instead tied to legal risk for the time being.
“Our valuation analysis suggests the stock is discounting $35B in value but the path to clarity on talc/opioid is opaque,” Lewis wrote.
Raymond James analyst Jayson Bedford said there is still plenty of drama ahead for Johnson & Johnson investors in the near term, but the company has solid fundamentals and the stock has an attractive valuation.
“While acknowledging that the stock will continue to be volatile on the litigation headlines, we remain comfortable with our estimates, expect revenue growth to accelerate in 2020, and believe the valuation offers downside support,” Bedford wrote.

Ratings And Price Targets

  • Morgan Stanley has an Equal-Weight rating and $145 target.
  • Wells Fargo has an Outperform rating and $157 target.
  • Raymond James has an Outperform rating and $146 target.
  • Bank of America has a Neutral rating and $150 target.

Afya IPO: What You Need To Know

A Brazilian medical education company is tapping the IPO market this week.

The IPO Terms

Afya has filed to offer 13.74 million Class A common shares in an IPO, with 11.83 million shares to be sold by the company and the remaining 1.92 million shares by selling shareholders, according to the F-1/A filing with the SEC dated July 9.
The common shares are to be priced between $16 and $18.
At the mid-point of the estimated price range, the size of the offering is $233.58 million.
The company has applied for listing the shares on the Nasdaq under the symbol AFYA.
Bank of America Merrill Lynch, Goldman Sachs, UBS and Itau BBA are the global coordinators for the offering.

The Company

Afya is a medical education company, delivering an end-to-end physician-centric ecosystem serving medical students through their medical residency preparation, graduation program and continuing medical education activities.
Citing data published by the Brazilian Ministry of Education, the company said it is the leading medical education group in Brazil. Its undergraduate and graduate campuses are spread across 12 Brazilian states and its digital medical platform is available across Brazil.
As of March 31, Afya had 14 undergraduate and graduate medical school campuses consisting of nine operating units.

The Financials

Afya reported net revenues of $85.7 million for the fiscal year 2018, up about 55% year-over-year. On a pro forma basis, net revenues came in at $140.5 million. The net income for the year was $24.3 million.
For the three months ended March 31, the company reported net revenues of $37.1 million, a 136% increase.

Invitae up on Citron support

Genetic testing outfit Invitae (NVTA +6.7%) is up on average volume in apparent response to a social media post that Citron Research has a long position with a $100 (321% upside) fair value target.
In Q1, revenue was up 47% to $40.6M, but shy of consensus. Sample volume was also up 47% to 94,000.
SA Authors rating is Bullish while Quant rating is Neutral.

Release of Fed Data Reveals 76B Opioid Pills Were Sold in the U.S. From 2006-2012

From 2006 to 2012 more than 76 billion opioid pain pills were sold in the United States, with three pharmaceutical manufacturing companies behind 88 percent of those, according to an analysis of a federal database maintained by the U.S. Drug Enforcement Agency.
Late Tuesday, the Washington Post released its analysis of the database that showed the three companies that manufactured the most oxycodone and hydrocodone pain pills during that six-year period were U.K.-based MallinckrodtActavis Pharma and Par Pharmaceutical, a subsidiary of Endo Pharmaceuticals, which was the first company the U.S.Food and Drug Administration (FDA) asked to remove an opioid product from the marketplace. Purdue Pharmaceuticals, which has become the poster-company of the opioid abuse crisis due to its aggressive marketing tactics, came in fourth on the manufacturing list. The OxyContin maker had about 3 percent of the market during that time, although the company has been accused of aggressively selling its painkiller since the 1990s. Oxycodone and hydrocodone make up about three-fourths of the types of opioids sent to pharmacies during this time period, the Post noted.
During the 2006 to 2012 period, the number of opioid pills on the market shot up 51 percent, the Post said in its analysis, from 8.4 billion pills in 2006 to 12.6 billion in 2012. During that time frame, approximately 100,000 people died from opioid-related overdoses. In 2017, opioids were responsible for the deaths of about 47,000 people in the United States.
Alongside the drug manufacturers, the Post’s analysis also pointed to the six biggest distributers of opioids during that time frame: Walgreens, McKesson Corp., Cardinal Health, CVS, Walmart and AmerisourceBergen.

The DEA database also revealed some surprising information about what the companies knew about the number of pills entering the market. The database provided information about the exact number of pills being dispensed, when the companies were made aware of the volume of pills being dispensed, as well as year by year and town by town information, the Post said. The evidence seems rather damning particularly as these companies are the subject of thousands of lawsuits from state and local governments. The Post noted that the companies “allowed the drugs to reach the streets of communities large and small, despite persistent red flags that those pills were being sold in apparent violation of federal law and diverted to the black market.”
The information in the database had long been held secret. However, a judicial order prompted the release of data up to 2013. U.S. District Judge Dan Polster said there is no basis for shielding older data, the Tribune Chronicle reported. The database information was released as part of ongoing opioid litigation in Ohio that targets manufacturers and distributors of opioids that have devastated communities across that state, as well as others. The lawsuits in Ohio target multiple opioid manufacturers, including Johnson & Johnson’s Janssen Pharmaceuticals, Purdue Pharma, Teva Pharmaceuticals and Cephalon, as well as the primary distributors.
In response to the release of the information in the database, a Mallinckrodt spokesperson told the Post that the company “produced opioids only within a government-controlled quota and sold only to DEA-approved distributors.” Actavis was acquired by Teva Pharmaceutical in 2016. A spokesperson for Israel-based Teva said the company is unable to speak about any systems regarding distribution that had been in place prior to the acquisition.
The release of the information from the DEA database will likely be seen as a boon from plaintiffs in the thousands of cases against the opioid manufacturers and distributors. A large number of lawsuits argue that opioid manufacturers and distributors used misleading marketing practices that contributed to high levels of addition. Additionally, the lawsuits argue that the companies downplayed concerns over abuse and were complicit in a large number of opioid deliveries to certain pharmacies in areas hard hit by the epidemic.