Baxter International Inc. disclosed errors in its financial
statements related to foreign-currency transactions, which may force the
company to restate results.
Baxter said Thursday that it has hired outside attorneys and
consultants to help it with an investigation into the transactions, all
of which occurred between different parts of the company.
Shares of Baxter fell more than 8% in Thursday morning trading.
When its investigation is complete, Baxter expects to either amend
previous financial statements that it filed with the Securities and
Exchange Commission to correct the errors, or to include in future
reports restated results that permit comparisons.
Baxter, of Deerfield, Ill, sells everything from dialysis products to
generic pharmaceutical drugs, and has customers in more than 100
countries, according to its latest annual report. The company said the
transactions it is looking at were executed to generate gains or losses
related to foreign currencies.
Between 2014 and last year, the company recorded a combined $272 million of gains related to foreign exchange, Baxter said.
In 2018, for example, the company recorded foreign-exchange gains of
$73 million. That income related to various intracompany receivables,
payables and other monetary assets, Baxter said in its latest annual
report.
It also recorded a $22 million gain connected to foreign currencies
during the first half of this year, according to a statement the company
issued Thursday.
Baxter said it voluntarily told the SEC about its investigation and
plans to provide information to the agency as it progresses. A spokesman
for the SEC declined to comment.
As part of any corrections made to its prior results, Baxter also
expects to correct certain operational items it has previously reported,
Chief Executive José Almeida told analysts on a conference call.
He said those changes aren’t material to operational results that Baxter has reported.
Those potential corrections relate to the exchange-rate method the
company used to translate results into U.S. dollars and the impact of
faulty accounting for equipment it leases to customers, Mr. Almeida
said.
“We’re taking steps to strengthen and enhance our internal controls,” he said.
The company released a limited set of financial results Thursday for the third quarter.
Global sales for the quarter rose 3% from last year to $2.85 billion,
slightly lower than the average analyst estimate on FactSet.
The company also reported operating income of $503 million for the
quarter. After adjustments, operating income totaled $555 million.
https://www.marketscreener.com/BAXTER-INTERNATIONAL-INC-11763/news/Baxter-International-May-Amend-Results-After-Finding-Accounting-Errors-29449806/
Thursday, October 24, 2019
Third Point Urges EssilorLuxottica to Improve Governance
Third Point LLC confirmed Thursday in a letter to investors that it
holds a stake of about $700 million in French optical giant
EssilorLuxottica SA (EL.FR), and said it has called on the company’s
management to solve a governance deadlock in order to deliver more
value.
The investment firm said EssilorLuxottica, which owns brands including Ray-Ban and Oakley, is “challenged by a poor corporate-governance framework,” and that it has met with company executives and shared its view that governance should be improved with the company’s board.
EssilorLuxottica’s current arrangement allows its two businesses to keep running as independent companies, slowing their integration as well as strategic decision-making, Third Point said.
The investment firm said shareholders are frustrated by EssilorLuxottica’s failure to deliver synergies from the merger of Essilor and Luxottica, which fused into one last year.
Third Point’s analysis of potential synergies forecasts more than 1 billion euros ($1.11 billion) in additional profit, which is almost double the company’s current target, the investment firm said.
Third Point sees EssilorLuxottica growing earnings and free cash flow at a compound annual growth rate of mid-teen digits for the next few years, and expects earnings per share at the company to more than double from 2019 to 2023, surpassing EUR8 in 2023.
The investment firm said it built its stake in EssilorLuxottica early in 2019, confirming media reports from the summer. EssilorLuxottica has a market capitalization of about 57.65 billion euros ($64.12 billion) and is, according to Third Point, the largest eyecare company in the world.
https://www.marketscreener.com/ESSILORLUXOTTICA-4641/news/EssilorLuxottica-Third-Point-Urges-EssilorLuxottica-to-Improve-Governance-29449846/
The investment firm said EssilorLuxottica, which owns brands including Ray-Ban and Oakley, is “challenged by a poor corporate-governance framework,” and that it has met with company executives and shared its view that governance should be improved with the company’s board.
EssilorLuxottica’s current arrangement allows its two businesses to keep running as independent companies, slowing their integration as well as strategic decision-making, Third Point said.
The investment firm said shareholders are frustrated by EssilorLuxottica’s failure to deliver synergies from the merger of Essilor and Luxottica, which fused into one last year.
Third Point’s analysis of potential synergies forecasts more than 1 billion euros ($1.11 billion) in additional profit, which is almost double the company’s current target, the investment firm said.
Third Point sees EssilorLuxottica growing earnings and free cash flow at a compound annual growth rate of mid-teen digits for the next few years, and expects earnings per share at the company to more than double from 2019 to 2023, surpassing EUR8 in 2023.
The investment firm said it built its stake in EssilorLuxottica early in 2019, confirming media reports from the summer. EssilorLuxottica has a market capitalization of about 57.65 billion euros ($64.12 billion) and is, according to Third Point, the largest eyecare company in the world.
https://www.marketscreener.com/ESSILORLUXOTTICA-4641/news/EssilorLuxottica-Third-Point-Urges-EssilorLuxottica-to-Improve-Governance-29449846/
DEA unveils new rule on opioid manufacturers after criticism
A new policy from the Drug Enforcement Administration (DEA) aims to
improve the agency’s quotas of controlled substances, with the intent of
preventing manufacturers from overproducing opioids.
A proposed rule published Wednesday would further limit excess quantities of medications that might be vulnerable to diversion for illicit distribution and use, the agency said in a statement.
Every year, the DEA sets a quota for how many opioid pills drugmakers are allowed to produce in the U.S. The quotas are set by the DEA with input from the Food and Drug Administration (FDA) and drug manufacturers.
DEA is charged with keeping controlled substances from being diverted
for abuse. The proposed rule would require that appropriate quota
reductions be made after estimating the potential for pills to be sold
illegally.
The proposal comes after an internal watchdog report showed the agency allowed drugmakers to increase production of opioids even as overdose deaths were skyrocketing.
According to the report, the DEA permitted drugmakers to increase their production of oxycodone, a highly addictive painkiller, by 400 percent between 2002 and 2013.
The DEA didn’t substantially cut the quota until 2017, when opioid overdose deaths reached a peak in the U.S.
Under the proposal, the diversion potential would be based on rates of overdose deaths and abuse, the overall public health impact related to specific controlled substances and may include other factors as appropriate, the agency said.
The proposal would also implement provisions of the Support Act, legislation passed last year to address the nation’s opioid epidemic.
The proposed rule seeks to introduce “use-specific” quotas, which would include quantities of controlled substances for use in commercial sales, product development, packaging/repackaging and labeling/relabeling or replacement for quantities destroyed.
https://thehill.com/policy/healthcare/467137-dea-unveils-new-regulation-on-opioid-manufacturers-after-criticism-from
A proposed rule published Wednesday would further limit excess quantities of medications that might be vulnerable to diversion for illicit distribution and use, the agency said in a statement.
Every year, the DEA sets a quota for how many opioid pills drugmakers are allowed to produce in the U.S. The quotas are set by the DEA with input from the Food and Drug Administration (FDA) and drug manufacturers.
The proposal comes after an internal watchdog report showed the agency allowed drugmakers to increase production of opioids even as overdose deaths were skyrocketing.
According to the report, the DEA permitted drugmakers to increase their production of oxycodone, a highly addictive painkiller, by 400 percent between 2002 and 2013.
The DEA didn’t substantially cut the quota until 2017, when opioid overdose deaths reached a peak in the U.S.
Under the proposal, the diversion potential would be based on rates of overdose deaths and abuse, the overall public health impact related to specific controlled substances and may include other factors as appropriate, the agency said.
The proposal would also implement provisions of the Support Act, legislation passed last year to address the nation’s opioid epidemic.
The proposed rule seeks to introduce “use-specific” quotas, which would include quantities of controlled substances for use in commercial sales, product development, packaging/repackaging and labeling/relabeling or replacement for quantities destroyed.
https://thehill.com/policy/healthcare/467137-dea-unveils-new-regulation-on-opioid-manufacturers-after-criticism-from
Syros Pharma down 5% on updated data on lead candidate
Thinly traded micro cap Syros Pharmaceuticals (SYRS -4.8%) slips on average volume on the heels of update results from its ongoing 40-subject Phase 2 clinical trial
evaluating lead drug SY-1425, combined with chemo agent azacitidine, in
newly diagnosed patients with relapsed/refractory acute myeloid
leukemia (AML) who are unsuitable for standard chemo.
The company says the combination continues to show
high complete response rates in a subset of AML patients who express a
biomarker called RARA (n=13).
In the RARA group, the complete response (CR)rate
was 62% (n=8/13) (includes one with incomplete blood count recovery)
(CRi). Duration of responses were up to 344 days.
The CR/CRi rate in RARA-negative patients was 27% (n=6/22).
The combo was not effective in the IRF8
biomarker-positive group (n=4) considering that the CR/CRi rate was 0%
so the company will use only RARA going forward, adding that this
subgroup comprises ~30% of newly diagnosed AML cases.
The study has been a long haul. It started over three years ago (August 2016) and is not expected to wind up until late 2021.
SY-1425 is a selective RARA (retinoic acid receptor alpha) agonist.
https://seekingalpha.com/news/3509167-syros-pharma-5-percent-updated-data-lead-candidateAbbVie and AstraZeneca settle respective patent suits over rival cancer drugs
AstraZeneca (AZN +5.7%) and AbbVie (ABBV -1.5%)
have agreed to settle their tit-for-tat patent infringement complaints
related to their respective kinase inhibitors Calquence (acalabrutinib)
and Imbruvica (ibrutinib).
AbbVie’s Pharmacyclics unit sued AZN in 2017
shortly after the FDA OK’d Calaquence for mantle cell lymphoma. AZN’s
Acerta unit retaliated with a suit of its own. Both claimed that the
other’s product infringed on certain of their patents.
Settlement terms remain confidential.
https://seekingalpha.com/news/3509214-abbvie-astrazeneca-settle-respective-patent-suits-rival-cancer-drugs
Hospitals can up profits from outpatient specialty drugs, but with major risks
As profit margins shrink for other core services, not-for-profit
hospitals will increasingly turn to income from outpatient specialty
drugs, a new analysis from Moody’s found.
But this shift comes with a high risk for hospitals as scrutiny of drug prices and the 340B drug discount program increases.
The analysis released Tuesday by the ratings agency said that the median cash flow margin for not-for-profit hospitals has declined over several years, decreasing from 9.5% in 2014 to nearly 8% in 2018.
“Income from purchasing outpatient specialty drugs will help ease
these margin constraints,” Moody’s analysts said. “Hospitals can make a
profit on outpatient specialty drugs, which they can bill separately. By
contrast, hospitals need to absorb the cost of inpatient drugs because
they are reimbursed a flat fee per admission.”
Safety net hospitals participating in the 340B program are eligible to get even greater margins because they can get such outpatient specialty drugs at a discount.
Hospitals don’t have many tools to negotiate for better prices on specialty drugs, but 340B-eligible hospitals “receive a much larger discount on the price of eligible outpatient drugs purchased for all patients, regardless of how they are insured,” Moody’s said.
Hospitals shouldn’t rely too much on this source of income, though, as recent regulatory and legislative proposals could put “downward pressure on drug prices and potentially reduce hospitals’ income from the purchase of specialty drugs,” the analysis added.
Moody’s mentions House Speaker Nancy Pelosi’s drug prices plan to give Medicare the power to negotiate for lower drug prices, including for specialty drugs, and to give commercial options the choice to adopt that price. But that plan, which is nearing a vote in the House, has major opposition in the GOP-controlled Senate.
Other bills in Congress would cap the out-of-pocket costs for Medicare Part D beneficiaries and curb growth on some high-cost drugs.
But it remains unlikely any of these bills will make it out of Congress and be signed by President Donald Trump.
There is also uncertainty around the 340B program. The agency in 2018 installed a $1.6 billion payment cut to the program. However, a federal judge ruled in May that the cuts were unlawful.
The Trump administration has not been deterred by the court ruling. In the 2020 Outpatient Prospective Payment System rule, the Centers for Medicare & Medicaid Services unveiled more cuts to the 340B program.
Hospitals in 340B don’t just have to worry about the Trump administration, though. Some commercial insurers could continue a trend of reducing reimbursement for drugs purchased by 340B providers, the analysis said.
“In addition, certain [pharmacy benefit managers] are attempting to reduce rates paid for retail specialty drugs purchased by 340B providers or are excluding 340B in-house specialty pharmacies from their drug plan networks,” Moody’s added.
https://www.fiercehealthcare.com/hospitals-health-systems/moody-s-hospitals-can-gain-profits-from-outpatient-specialty-drugs-but
The analysis released Tuesday by the ratings agency said that the median cash flow margin for not-for-profit hospitals has declined over several years, decreasing from 9.5% in 2014 to nearly 8% in 2018.
Safety net hospitals participating in the 340B program are eligible to get even greater margins because they can get such outpatient specialty drugs at a discount.
Hospitals don’t have many tools to negotiate for better prices on specialty drugs, but 340B-eligible hospitals “receive a much larger discount on the price of eligible outpatient drugs purchased for all patients, regardless of how they are insured,” Moody’s said.
Hospitals shouldn’t rely too much on this source of income, though, as recent regulatory and legislative proposals could put “downward pressure on drug prices and potentially reduce hospitals’ income from the purchase of specialty drugs,” the analysis added.
Moody’s mentions House Speaker Nancy Pelosi’s drug prices plan to give Medicare the power to negotiate for lower drug prices, including for specialty drugs, and to give commercial options the choice to adopt that price. But that plan, which is nearing a vote in the House, has major opposition in the GOP-controlled Senate.
Other bills in Congress would cap the out-of-pocket costs for Medicare Part D beneficiaries and curb growth on some high-cost drugs.
But it remains unlikely any of these bills will make it out of Congress and be signed by President Donald Trump.
There is also uncertainty around the 340B program. The agency in 2018 installed a $1.6 billion payment cut to the program. However, a federal judge ruled in May that the cuts were unlawful.
The Trump administration has not been deterred by the court ruling. In the 2020 Outpatient Prospective Payment System rule, the Centers for Medicare & Medicaid Services unveiled more cuts to the 340B program.
Hospitals in 340B don’t just have to worry about the Trump administration, though. Some commercial insurers could continue a trend of reducing reimbursement for drugs purchased by 340B providers, the analysis said.
“In addition, certain [pharmacy benefit managers] are attempting to reduce rates paid for retail specialty drugs purchased by 340B providers or are excluding 340B in-house specialty pharmacies from their drug plan networks,” Moody’s added.
https://www.fiercehealthcare.com/hospitals-health-systems/moody-s-hospitals-can-gain-profits-from-outpatient-specialty-drugs-but
Sandoz appears on the mend. But where is that Aurobindo U.S. generics deal?
If you think Roche’s $4.3 billion offer to buy out Spark Therapeutics
is the only biopharma deal being significantly delayed by antitrust
reviews, think again.
Over a year has passed since the $1 billion acquisition of Novartis’ Sandoz U.S. oral solids and dermatology business, by India’s Aurobindo Pharma, was made public. And still, the two parties are expecting it’ll be months before they complete the transaction.
The reason? Some “elements” that the U.S. Federal Trade Commission (FTC) has requested, Novartis CEO Vas Narasimhan told reporters during a call Tuesday. He also confirmed that the recent recall of generic Zantac due to contamination from a suspected carcinogen has not affected the deal at all.
When the companies first announced the tie-up in September 2018, Novartis said it expected to close it in 2019; now, the company says it could be done “in the coming months, pending regulatory approval.” Both companies are working closely with the authorities, including the FTC, a Novartis spokesperson told FiercePharma, declining to offer more details on the FTC’s demands.
There’s clearly a delay in expected closure time. During a conference call in May, Aurobindo U.S. Chief Financial Officer Swami Iyer told investors the company was “in the last leg of the process of obtaining FTC approval” and that it was on track to submit the final letter with the proposed product divesture and buyers list to the U.S. agency. At that time, he said the process could take between eight to 12 weeks. That 12-week period has already elapsed as of September.
On Aurobindo’s quarterly earnings call in August, Iyer again said it was “making good progress” with the FTC. But this time, he said only that the company would get the deal closed “sometime soon or in the near future,” rather than offering up a more specific timeline.
At this point, additional FTC scrutiny has become common for biopharma dealmakers. Industry watchers have been primed with continuous delays to Roche’s Spark takeover, the unexpected request for Celgene to sell Otezla in the $74 billion Bristol-Myers Squibb merger and the so-called “second request” for more information sent AbbVie and Allergan’s way even after Allergan volunteered to jettison two drugs.
For Sandoz-Aurobindo specifically, the addition of about 300 generic products to the Indian firm’s portfolio would create the second-largest generics player in the U.S. by number of prescriptions. Some selloffs may be natural to expect, but a 14-month gap since the deal announcement is not.
Novartis is currently trying to turn Sandoz into an autonomous business within the group, shifting its focus to hard-to-make copies and biosimilars. In the third quarter, the generics unit turned out sales of $2.48 billion, up 3% year over year and nearly 4% above the Street’s expectations. As a result, Novartis raised Sandoz’s full-year guidance to low single-digit growth.
But the third-quarter expansion came largely from biologics—which increased 27% during the quarter—and from outside of the U.S., as continued price erosion in the U.S. posed a drag, Richard Saynor, Sandoz’s recently appointed CEO, told investors on a Tuesday call.
It was basically the same tune Novartis has sung before. This time, the 4% global price erosion was slightly better than the 7% reported in the second quarter and the 9% in the first. However, Sandoz’s U.S. pricing pressure appears to be worse than the 2% SVB Leerink analyst Ami Fadia gleaned from the National Average Drug Acquisition Cost data.
That means if Aurobindo is indeed required by the FTC to shed some Sandoz products, it might be difficult to find an ideal buyer at a winning price. The Indian drugmaker has pegged $900 million pre-divestment for sales of the acquired portfolio in the first 12 months after deal closure.
“We have no reason to believe that there will be any deterioration in the expectations,” Iyer said in August. “We are fairly optimistic about what we expect to achieve.”
https://www.fiercepharma.com/pharma/novartis-sandoz-appears-mend-but-where-aurobindo-u-s-generics-deal
Over a year has passed since the $1 billion acquisition of Novartis’ Sandoz U.S. oral solids and dermatology business, by India’s Aurobindo Pharma, was made public. And still, the two parties are expecting it’ll be months before they complete the transaction.
The reason? Some “elements” that the U.S. Federal Trade Commission (FTC) has requested, Novartis CEO Vas Narasimhan told reporters during a call Tuesday. He also confirmed that the recent recall of generic Zantac due to contamination from a suspected carcinogen has not affected the deal at all.
When the companies first announced the tie-up in September 2018, Novartis said it expected to close it in 2019; now, the company says it could be done “in the coming months, pending regulatory approval.” Both companies are working closely with the authorities, including the FTC, a Novartis spokesperson told FiercePharma, declining to offer more details on the FTC’s demands.
There’s clearly a delay in expected closure time. During a conference call in May, Aurobindo U.S. Chief Financial Officer Swami Iyer told investors the company was “in the last leg of the process of obtaining FTC approval” and that it was on track to submit the final letter with the proposed product divesture and buyers list to the U.S. agency. At that time, he said the process could take between eight to 12 weeks. That 12-week period has already elapsed as of September.
On Aurobindo’s quarterly earnings call in August, Iyer again said it was “making good progress” with the FTC. But this time, he said only that the company would get the deal closed “sometime soon or in the near future,” rather than offering up a more specific timeline.
At this point, additional FTC scrutiny has become common for biopharma dealmakers. Industry watchers have been primed with continuous delays to Roche’s Spark takeover, the unexpected request for Celgene to sell Otezla in the $74 billion Bristol-Myers Squibb merger and the so-called “second request” for more information sent AbbVie and Allergan’s way even after Allergan volunteered to jettison two drugs.
For Sandoz-Aurobindo specifically, the addition of about 300 generic products to the Indian firm’s portfolio would create the second-largest generics player in the U.S. by number of prescriptions. Some selloffs may be natural to expect, but a 14-month gap since the deal announcement is not.
Novartis is currently trying to turn Sandoz into an autonomous business within the group, shifting its focus to hard-to-make copies and biosimilars. In the third quarter, the generics unit turned out sales of $2.48 billion, up 3% year over year and nearly 4% above the Street’s expectations. As a result, Novartis raised Sandoz’s full-year guidance to low single-digit growth.
But the third-quarter expansion came largely from biologics—which increased 27% during the quarter—and from outside of the U.S., as continued price erosion in the U.S. posed a drag, Richard Saynor, Sandoz’s recently appointed CEO, told investors on a Tuesday call.
It was basically the same tune Novartis has sung before. This time, the 4% global price erosion was slightly better than the 7% reported in the second quarter and the 9% in the first. However, Sandoz’s U.S. pricing pressure appears to be worse than the 2% SVB Leerink analyst Ami Fadia gleaned from the National Average Drug Acquisition Cost data.
That means if Aurobindo is indeed required by the FTC to shed some Sandoz products, it might be difficult to find an ideal buyer at a winning price. The Indian drugmaker has pegged $900 million pre-divestment for sales of the acquired portfolio in the first 12 months after deal closure.
“We have no reason to believe that there will be any deterioration in the expectations,” Iyer said in August. “We are fairly optimistic about what we expect to achieve.”
https://www.fiercepharma.com/pharma/novartis-sandoz-appears-mend-but-where-aurobindo-u-s-generics-deal
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