Week of February 6, 2017 | Vol. 6, Issue 4
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Trump's pharma CEO confab: Get prices 'way down,' get 'better innovation' and get back to U.S.
Pharma industry leaders, including Novartis CEO Joe Jimenez and Merck & Co. chief Kenneth Frazier, got their marching orders from President Donald Trump on Tuesday morning. Lower your prices, deliver "better" innovation and "move your companies back" to the U.S.
The response, according to reports out of the meeting? We're already hiring-and by the way, give us tax reform, and we'll hire even more.
Eli Lilly & Co. CEO David Ricks, Celgene Chairman Robert Hugin, PhRMA president and CEO Stephen Ubl and other PhRMA board members also attended the meeting, after which Trump promised to speed up drug development and end "global freeloading" by countries that use price controls to keep their drug spending down.
"Our trade policy will prioritize that foreign countries pay their fair share for U.S.-manufactured drugs, so our drug companies have greater financial resources to accelerate development of new cures, and I think that's so important," Trump said.
What, exactly, the president meant by the "trade policy" comment wasn't clear, but he has proposed a 20% "border tax" on imports, which would hit drugmakers that make their products in other countries.
To his previous demands for lowering prices and manufacturing in the U.S., the president urged the CEOs to "move your companies back" to the U.S., perhaps referring to drugmakers, such as Allergan, which moved their headquarters to tax-friendly jurisdictions overseas through inversion deals.
According to CNBC's Meg Tirrell, Ricks told Trump that his company is hiring manufacturing workers in the U.S. "as we speak," and Amgen's CEO said his company would be adding 1,600 jobs in 2017. Amgen and
Lilly
have each laid off more than 1,000 workers in recent years-Amgen said it would
slash 15%
of its workforce in 2014-and Lilly announced
485 job cuts
just last week, mostly in its Alzheimer's division.
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Pfizer weighs $2B-plus portfolio sale that could drum up dealmaking funds: Bloomberg
Pfizer's execs have said they're not going to pause on dealmaking to wait for a potential U.S. tax code revamp that could free up cash trapped overseas. They may have another plan to drum up M&A funds, though.
The New York drugmaker is
looking into a sale of a portfolio of meds that includes treatments in cardiology, urology and primary care, Bloomberg reports. The company has brought on JPMorgan Chase & Co. to advise it on the process.
Divesting the stable of meds, which generate sales of more than $700 million-about 40% of which come from the U.S., and another 45% from Europe-could net Pfizer more than $2 billion, sources told the news service. Other drugmakers and private equity firms could be among the suitors, they said.
Pfizer hasn't been shy about discussing its intent to keep the deal train rolling. At the J.P. Morgan Healthcare Conference in January, CFO Frank D'Amelio
told
investors the company was looking for deals that could pad its top line "now or soon," the way its $16 billion
Hospira
buy, its $14 billion
Medivation
pact and its $5 billion
Anacor
pickup have. And earlier this week, on the company's fourth-quarter earnings call, CEO Ian Read told shareholders loud and clear that Pfizer wouldn't be sitting around waiting for tax reform before making its moves.
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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
14 transactions totaling $216
million
Supplies, Equipment & Services
18 transactions totaling $192 million
Healthcare IT & Managed Care
4 transactions totaling $457 million
Healthcare Facilities & Distributors
12 transactions totaling $23 million
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Pharma & Biotech
12 private placements totaling $123 million
Supplies, Equipment & Services
12 private placements totaling $21 million
Healthcare IT & Managed Care
6 private placements totaling $87 million
Healthcare Facilities & Distributors
0 private placements
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Pharma & Biotech
7 public offerings totaling $19 million
Supplies, Equipment & Services
1 public offerings totaling $25 million
Healthcare IT & Managed Care
0 public offerings
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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February 1, 2017 -
Wall Street Journal
Federal regulators proposed slightly higher payments for insurers that offer private Medicare plans, a closely watched figure because of the increasingly important role that the Medicare business plays in companies' bottom lines.
The Centers for Medicare and Medicaid Services estimated that the Medicare Advantage rate proposal represented a 0.25% increase on average for 2018, though the agency said insurers would likely see overall revenue increase about 2.75% as they deliver-and bill for-more intense services.
The agency said the rates represented "moderate growth." In a statement, the acting CMS Administrator, Patrick Conway, said the proposal "will continue to keep Medicare Advantage strong and stable and provide high quality, affordable care to seniors and people living with disabilities."
The increase appeared roughly in line with the expectations of analysts, who had been anticipating a small boost in the rates. For instance, Piper Jaffray had projected they would be flat to up 2%. Thomas Carroll, an analyst with
Stifel Financial
Corp.
, said the actual rate is "in the range" expected by investors, and "the reaction will be neutral."
Federal Trade Commission Questions Mylan on EpiPen
January 30, 2017 -
Wall Street Journal
Mylan NV said it has received a "preliminary" inquiry from the U.S. Federal Trade Commission asking about the company's commercial practices for its EpiPen severe-allergy treatments.
A statement from the company indicated the inquiry included questions about Mylan's efforts to block rival
Teva Pharmaceutical Industries
Ltd. from gaining approval in the U.S. to sell a generic version of EpiPen.
"Any suggestion that Mylan took any inappropriate or unlawful actions to prevent generic competition is without merit," the company said in the statement.
Mylan has challenged Teva's efforts to gain approval for selling a generic EpiPen, saying Teva's version isn't an exact copy, and that its different device could endanger patients who were only trained to use Mylan's EpiPen.
Last year, the Food and Drug Administration rejected Teva's application for approval, without specifying the reasons, Teva said.
February 2, 2017 - Wall Street Journal
Novo Nordisk A/S warned Thursday its revenue could fall in 2017, knocking more than 9% off its share price, as the insulin giant grapples with intensifying competition in the crucial U.S. market.
The Danish company said it expected 2017 sales to range between a decline of 1% and growth of 4%, with operating profit seen between a fall of 2% and growth of 3% in local-currency terms. Novo Nordisk previously forecast low single-digit growth in sales and flat to low-single-digit growth in operating profit.
Shares in Novo Nordisk, which is the world's largest insulin maker, were down more than 9% in late Copenhagen trade Thursday.
The company, unusual among its peers for
its narrow focus
, has notched consistent sales growth, in part due to the global diabetes epidemic. However, the growth was also driven by regular price increases in the U.S., its biggest market.
Recently, that has changed. In 2016, Novo Nordisk was forced to cut the price of its biggest-selling insulin drugs, as powerful middlemen that negotiate medicine prices on behalf of insurers and employers
played it off against its biggest rival
, France's Sanofi SA.
February 2, 2017 -
Fierce Pharma
Following up on a similar bill that didn't make it far in the U.S. Congress last year, a pair of legislators are pushing forward with an act aimed at fighting price gouging and improving generic competition.
Reps. Gus Bilirakis and Kurt Schrader introduced the Lower Drug Costs Through Competition Act this week to boost incentives for generic drug development in markets where there's a monopoly or a drug shortage. The legislation has important support from House Energy and Commerce Committee chair Rep. Greg Walden.
Next week, Walden will start the process of advancing the bill through his committee, according to prepared
remarks
for a Tuesday hearing. The Oregon congressman was part of a group who
met
with President Donald Trump Tuesday to talk about drug prices, among a slew of other issues affecting the pharmaceutical industry.
Bilirakis and Schrader's bill is "
nearly identical
" to a House bill introduced last March, according to the FDA Law Blog. It would prioritize FDA reviews for copycats to meds in markets with little competition and for those included on an official shortage list. It would also add incentives for copycat drug development by creating a priority review voucher system for generic applications. So far, the bill has bipartisan support.
Citing a series of hikes targeted during pharma's protracted pricing controversy, Rep. Schrader said the bill could have helped in cases of recent price increases by Mylan on EpiPen, Turing Pharma on Daraprim and Valeant Pharmaceuticals on a lead-poisoning treatment. Each case featured a drug with no generic competition as its manufacturer jacked up prices, Rep. Schrader's
statement
said.
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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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