Week of October 31, 2016 | Vol. 5, Issue 43
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Shares of drug wholesalers were slammed Friday amid signs that a price war has broken out in the sector, following a dour earnings report from McKesson Corp., one of the largest pharmaceutical distributors in the U.S.
McKesson
sharply cut its annual profit outlook Thursday afternoon, citing the decelerating rise of drug prices and internal competition among the companies that bridge drug manufacturers with pharmacies.
"We expect the combination of recent competitive pricing and further moderating branded price-increase activity will have a combined negative effect on our business by approximately $1.60 to $1.90 per diluted share...with the larger impact coming from competitive pricing," said
John Hammergren, CEO of McKesson, according to a conference call transcript.
"I know at least one company in our sector has been pretty public about growing revenues above market and about regaining market share, particularly in the independent space," Mr. Hammergren said on the call, stopping short of singling out a company by name.
The sounding of the alarm by McKesson triggered a selloff of the sector's biggest players, with McKesson's share price sinking 26%,
Cardinal Health
Inc.
sliding 14% and
AmerisourceBergen
Corp.
retreating 12%. Shares of some drugmakers also declined, with an NYSE index of pharmaceutical stocks falling 1.8% Friday afternoon.
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Astellas snaps up cancer antibody play Ganymed for up to $1.4B
Astellas Pharma expects to beef up its oncology franchise with the purchase of German biotech Ganymed Pharmaceuticals for what could be a total of $1.4 billion. The Japanese pharma is already partnered with Pfizer on prostate cancer treatment Xtandi (enzalutamide), which had $2.2 billion in global net sales over the past year.
Astellas was partnered with Medivation on Xtandi under a
2009 deal, which transferred to Pfizer, of course, after the recently closed $14 billion
acquisition. With this Ganymed purchase, Astellas gains lead candidate IMAB362, which recently had
positive Phase IIb data in gastroesophageal cancer that stole the show at ASCO.
"Oncology is one of our focus therapeutic areas and key drivers for our growth," said Astellas President and CEO Yoshihiko Hatanaka in a
statement
. "The acquisition of Ganymed will enable Astellas to further expand our oncology presence by adding a late-stage antibody asset with the potential to establish a new pillar following Xtandi. We aim to deliver a potential new therapeutic option to cancer patients who currently have limited treatment options available to them."
Under the deal, Astellas is paying €422 million ($461 million) upfront; it will pay up to an additional €860 million ($940 million) in milestones based on the progress of IMAB362. In addition to the GI data, that candidate is in preclinical testing for other solid tumors including pancreatic cancer. The deal is expected to close in the next several weeks; Ganymed will become a subsidiary of Astellas.
Ganymed's majority shareholder is ATS Beteiligungsverwaltung, which is a family office for well-known German biotech investors the Strüngmann brothers. Future Capital and MIG Fonds are also investors in the biotech. Ganymed reportedly
has raised
$113 million in venture capital, with the most recent infusion being a
$60 million Series E
round in 2013.
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Below are summaries and charts with the past week's transactions from the different healthcare sectors. For a detailed table showing data for each industry transaction click on any of the charts or use the download link above. Total transaction values are provided in USD millions.
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Pharma & Biotech
7 transactions totaling $1,645
million
Supplies, Equipment & Services
14 transactions totaling $262 million
Healthcare IT & Managed Care
4 transactions totaling $- million
Healthcare Facilities & Distributors
7 transactions totaling $617 million
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Pharma & Biotech
15 private placements totaling $421 million
Supplies, Equipment & Services
12 private placements totaling $67 million
Healthcare IT & Managed Care
6 private placements totaling $9 million
Healthcare Facilities & Distributors
7 private placement totaling $31 million
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Pharma & Biotech
11 public offerings totaling $1,236 million
Supplies, Equipment & Services
2 public offerings totaling $12 million
Healthcare IT & Managed Care
1 public offering totaling $1,200 million
Healthcare Facilities & Distributors
0 public offerings
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 Each week, w
e provide updated trading
comps for leading comp
anies from numerous healthcare subsectors.
To the right you will see a high-level breakdown of median revenue and EBITDA multiples for each of the specific subsectors
For a complete trading comp analysis (including the individual equities that comprise the subsectors), click on the table to the right or use the download link from the top of this newsletter.
Note: data reflects prior week close.
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RECENT INDUSTRY HEADLINES
A Sampling of Relevant Industry Headlines from the Last Week
Below are snippets from relevant industry news articles from the past week presented in chronological order. For additional information or the article's complete text, click the headline link to view the original publication.
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Myovant bumps IPO to $218M with Pfizer, BB Biotech aid
October 27, 2016 -
Fierce Biotech
Biotech IPOs are faring well this fall. That's despite tough talk from U.S. politicians on biopharma pricing, as the topic has become a focal point in the presidential elections. In a second IPO of the week, Myovant Sciences raised a larger-than-expected offering after it priced at the top of its projected range and raised the number of shares.
The Myovant IPO was backed by new investors Pfizer and European healthcare investor BB Biotech, each of which bought $30 million of the IPO. Pfizer gains a right of first negotiation and a board observer seat at Myovant.
October 27, 2016 -
Fierce Pharma
For the third straight quarter, GlaxoSmithKline CEO Andrew Witty is sticking it to his critics. The British drugmaker--which has doubled down on low-margin businesses, shied away from areas subject to pricing pressure and repeatedly promised a triumphant comeback for its respiratory business--turned in solid results once again. Revenues of £7.54 billion came in close to £300 million ahead of analyst expectations. EPS of 32 pence also topped forecasts, which tallied 29.6 pence.
October 27, 2016 - Fierce Pharma
Earlier this month, calls rang out for congressional pharma critics to investigate pharmacy benefits managers. Turns out the U.S. Justice Department already had one of the industry's largest under a microscope.
Express Scripts
disclosed this week that the U.S. Attorney's offices in New York and Massachusetts had demanded information about two different issues: financial ties with pharma companies, and relationships among drugmakers, patient assistance programs and the specialty pharmacies that fill prescriptions.
Specifically, the federal prosecutors in New York want information about money changing hands between Express Scripts and pharma companies. That would include rebates that drugmakers pay to win favorable reimbursement deals for their products.
Sanofi and Regeneron's expected blockbuster hit with FDA CRL for manufacturing concerns
October 28, 2016 -
Fierce Pharma
Sanofi and R&D partner Regeneron were all lined up for a possible FDA approval today for their experimental IL-6 inhibitor sarilumab, an expected blockbuster that will compete with AbbVie's Humira. Instead, the companies announced that the FDA issued them a complete response letter related to "manufacturing deficiencies" at a Sanofi fill-finish facility, delaying its potential approval.
The day had started out with an omen. In Sanofi's earnings call today, CEO Olivier Brandicourt said that "manufacturing deficiencies, not specifically related to sarilumab," were cited during a routine FDA inspection of a fill-finish facility where sarilumab syringes are filled. He said the company was working with the FDA on the issues and at that point didn't know if it would keep the drug from being approved today.
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As an international, healthcare-focused merchant bank and financial advisory firm, we provide world-class services and capital to middle-market healthcare companies around the globe. We aim to keep our clients well-informed of healthcare news and events. With this additional insight in mind, together, we can recognize trends and opportunities that benefit our clients. We hope that you will reach out to Bourne Partners to help execute your healthcare operational and transactional needs. To learn more about our firm, visit our website or utilize the links below to engage with us on social media.
Sincerely,
The Bourne Partners Team
Bourne Partners
550 South Caldwell Street
Suite 900
Charlotte, NC 28202
704-552-8407
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