Week of November 21, 2016 | Vol. 5, Issue 46
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The industry is braced for charges from a Justice Department probe into possible collusion on generic drug prices, but ahead of that, some face civil litigation over pumped-up prices. Civil suits have been filed naming Novartis, Sun Pharma's Taro, Wockhardt, Actavis, Perrigo and others for allegedly agreeing at an industry meeting to raise prices on generic skin creams.
The lawsuits have been filed by unions which claimed that because of the collusion, they
overpaid for the drug or drugs, Bloomberg reported. They pointed to data that the drugmakers took price hikes on certain meds by nearly the same amounts within months of one another.
A lawsuit filed by the Sergeants Benevolent Association Health & Welfare Fund alleged that Sandoz, Akorn's Hi-Tech, Perrigo, Taro and Wockhardt made a deal on prices at the 2014 annual meeting of the Generic Pharmaceutical Association. It cited data that showed the companies' prices started rising within a couple of months of the meeting. It cited data showing that about a year after the meeting, Sandoz, Hi-Tech, Perrigo and Taro had all raised their prices for clobetasol by 894.35 percent.
"So that's sort of an odd number, right?" Peter Safirstein, a lawyer for the union told Bloomberg. "Is it a coincidence that every single manufacturer happens to be at 894.35 percent for a topical gel as a price increase?"
Perrigo, Taro and Teva, which this year acquired Actavis, declined to comment to Bloomberg, while Wockhardt and Hi-Tech owner Akorn didn't respond to requests for comment. Novartis' Sandoz unit in a statement declined to comment on the litigation, Bloomberg said, but pointed out that net prices of its health-care products in the U.S. went down 7 percent in 2015. It is among the many companies to disclose receiving DOJ subpoenas into generic drug pricing, but said it has never been notified that it is a target of the investigation.
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U.S. Attorney Charges Former Valeant, Philidor Executives, Alleging Fraud and Kickback Scheme
Valeant Pharmaceuticals International
Inc.
for a year has weathered a scandal over its relationship with a mail-order pharmacy that critics say helped it secure lofty prices for its drugs.
Now prosecutors say they have uncovered another troubling connection between the two companies. They alleged Thursday that two men-one from each company-enriched each other through a multimillion-dollar fraud and kickback scheme by directing more business and money to the pharmacy, Philidor Rx Services LLC.
Valeant and its shareholders suffered as a result, prosecutors said. Former Valeant executive Gary Tanner and former Philidor chief executive Andrew Davenport were arrested at their homes early Thursday as the U.S. attorney's office in Manhattan alleged in a criminal complaint that they conspired to persuade Valeant to funnel its business to Philidor.
Philidor helped the Canadian drug company sell some of its higher-priced dermatology and other products by helping patients obtain insurance reimbursements and other forms of financial assistance for prescriptions.
Philidor's Mr. Davenport allegedly paid Mr. Tanner about $10 million in kickbacks for advocating for the pharmacy inside Valeant, according to the complaint. Meanwhile, Mr. Tanner allegedly facilitated deals that helped Mr. Davenport reap more than $40 million from Valeant, the complaint said.
The day after Mr. Davenport was paid about $31.4 million from Valeant, he transferred about $7.5 million to a company called Befrielse, which the complaint alleges was controlled by Mr. Tanner.
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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
13 transactions totaling $162
million
Supplies, Equipment & Services
15 transactions totaling $471 million
Healthcare IT & Managed Care
5 transactions totaling $719 million
Healthcare Facilities & Distributors
14 transactions totaling $1,290 million
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Pharma & Biotech
12 private placements totaling $161 million
Supplies, Equipment & Services
15 private placements totaling $125 million
Healthcare IT & Managed Care
12 private placements totaling $28 million
Healthcare Facilities & Distributors
4 private placements totaling $135 million
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Pharma & Biotech
19 public offerings totaling $13,455 million
Supplies, Equipment & Services
9 public offerings totaling $15,191 million
Healthcare IT & Managed Care
1 public offering totaling $- million
Healthcare Facilities & Distributors
1 public offering totaling $750 million
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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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November 17, 2016 -
Wall Street Journal
After working at Theranos Inc. for eight months, Tyler Shultz decided he had seen enough. On April 11, 2014, he emailed company founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks.
November 17, 2016 -
Fierce Pharma
When presidential candidate Hillary Clinton blasted Martin Shkreli on Twitter for hiking the price of an old drug called Daraprim by 5,000% in September 2015, biotech stocks plummeted. Clinton tweeted that such price hikes in the drug market were "outrageous" and that she planned to "take it on."
So when she unexpectedly lost the election last week, it's little surprise that shares of drug companies rallied, with the Nasdaq Biotech Index jumping 9% the day after the election-its biggest one-day spike in 8 years. The biopharma sector enjoyed a further boost from the failure of California's Proposition 61, an effort to control drug prices by requiring that state agencies pay no more for medicines than the Department of Veterans Affairs does.
But it may be premature for investors to put on their party hats and pile into pharma and biotech stocks, many analysts warn. Private payer pressure on prices will only continue, and other voices are joining the chorus of calls for overhauls of the U.S. system. Just this week, the American Medical Association urged a "fundamental" change to drug pricing that would link cost to value.
November 17, 2016 - Fierce Pharma
Sanofi and Regeneron might have had a chance to take the lead in the PCSK9 sales race, but that fuel injection didn't come through.
A cardiovascular outcomes trial on Praluent, widely seen as key to the drug's success, will
go ahead
as planned, rather than stopping early as the companies might have hoped. Final results aren't due till late 2017 or early 2018, leaving Sanofi and Regeneron to wait for the marketing boost an early success would have offered.
The announcement wasn't unexpected; the ODYSSEY OUTCOMES trial had set ambitious benchmarks for an early halt, analysts said. And it doesn't necessarily indicate that the trial won't deliver the positive results Praluent needs.
Novartis AG Reportedly in Talks to Buy New Jersey's Amneal, Deal Could be Worth $8 Billion
November 14, 2016 -
BioSpace
Rumors are spreading that Novartis AG (NVS) is in talks to buy Bridgewater, NJ-based Amneal Pharmaceuticals. Depending on the structure of the deal, Amneal could be valued at as much as $8 billion. Amneal was founded in 2002 by Chintu and Chirag Patel. It is currently the seventh-largest generic manufacturer in the U.S. It has more than 4,000 employees with offices in Australia, Europe and Asia. It is a private company. Bloomberg wrote, "Europe's second-biggest drugmaker by sales (Novartis) has signaled its interest in deals as speculation mounts that it's weighing a potential sale of its share in crosstown rival Roche Holding AG. Beyond its focus on late-stage cancer or pharmaceutical assets, Novartis may also consider purchases that could strengthen its generics unit, Chief Executive Officer Joe Jiminez said in an interview last month." Specifically, Jimenez said, "If we were able to locate, let's say, differentiated generics that would strengthen Sandoz's position in certain geographies, that would be another priority."
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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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