We track Emerging Markets growth rates for our covered companies. It has accelerated consistently since mid-2016; in Q3 2018 it was 11.6% y/y. From Q1 2012 to Q3 2018, y/y growth has been: 6.4% (10.3% (9.1% (9.5% (6.4% (10.3% (9.1% (9.5% (7.4% (6.1% (3.9% (9.5% (6.4% (8.3% (10.9% (8.0% (7.5% (4.7% (3.6% (3.2% (4.4% (1.8% (3.6% (3.3% (5.8% (6.1% (7.4% (7.5% (9.1% (9.5% (11.6% (Exhibit 1).
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This report covers the bull/bear case, current controversies, relative growth prospects and more for our 10 US & EU global pharmaceutical companies.
GSK and PFE have announced they will combine their consumer health divisions into a joint venture, majority owned by GSK (68%). GSK says they JV will then be separated out as a stand-alone company within 3y.
The Medicare coverage gap, aka “donut hole”, has been a component of the Medicare Part D program since it was established in 2003. The presumed intent of the donut hole was to increase patients’ financial responsibility during some part of their care, with the hope that they would help contribute to making rational drug choice decisions. However, the enactment of the Patient Protection and Affordable Care Act (the “ACA”) in 2010 has sought to undo this – it encompassed legislation to lower beneficiaries’ financial exposure, with the goal of eliminating it completely by 2020.
On November 29th, we hosted the last conference call of our 2018 Pipelines Unplugged series (and our first one at Wolfe). We hosted five members from GSK’s R&D senior leadership team. The body of this note is a comprehensive recap of the call.
On Monday (12/03/18), GSK announced it is acquiring oncology company Tesaro for ~$5B. This comes from a company who back in 2014 took moves to exit oncology through an asset swap with Novartis – a decision that always seemed strange to us, and one that GSK highly likely regrets. TSRO has been a stock that has struggled in the face of competition to its lead asset, Zejula, a PARP inhibitor currently approved for ovarian cancer. TSRO has three other oncology pipeline assets that are more peripheral to the story, but they offer upside optionality should they hit – expectations on these are understandably low at the moment.
Wolfe Research's Senior Pharma analyst, Tim Anderson, hosted one of his “Pipelines Unplugged” fireside chats with senior R&D management from GlaxoSmithKline. Speakers from GSK included Dr. Hal Barron (Chief Scientific Officer and President R&D), Dr. John Pottage (Chief Scientific and Medical Officer, ViiV), Dr. Emmanual Hanon (SVP R&D, Vaccines), Dr. Axel Hoos (SVP, Therapeutic Area Head, Oncology R&D), and Dr. John Lepore (SVP Research).
We recently wrote a brief investor update on the investment case for BMY (BMY: Summarizing the Investment Case). In it, we said that it is time to move on from the idea that Opdivo+Yervoy in lung cancer is going to work. This is because the totality of the evidence thus far (from both BMY and AZN) has been that anti-CTLA4 therapies just don’t seem to do much in this particular tumor type. A bearish view on CTLA4 is not a thesis change for us, but for many of the former “bulls” on the stock it has been, and it is one of the reasons BMY shares have struggled.
On November 19th, we published a report (Global Pharmaceuticals - Removal of "Protected Drug Class" Status Coming?) claiming that the Administration may seek to change language related to the six “protected drug classes” in the near-term. Proposed changes have just been released (along with other proposals aimed at helping to manage healthcare spending; not addressed in this report). These proposals are not finalized, meaning it is not clear what ultimately survives the comment period that comes next; implementation would likely begin in 2020.
Presently, six classes of drugs are protected from aggressive formulary management in Medicare Part D plans. This “protected drug class” policy came into effect in 2003 when Medicare Part D was first established.
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