Zacks Industry Outlook Highlights: Bristol-Myers, Pfizer, Sanofi, Amgen And Biogen

For Immediate Release

Chicago, IL – July 25, 2016 – Today, Zacks Equity Research discusses Pharma, including Bristol-Myers (BMY), Pfizer (NYSE:PFE) (PFE), Sanofi (PA:SASY) (SNY), Amgen (NASDAQ:AMGN) (AMGN) and Biogen (NASDAQ:BIIB) (BIIB).

Industry: Pharma

Link: https://www.zacks.com/commentary/86599/pharma-industry-outlook-fundamentals-remain-strong

It’s been a rough start to the year for pharma and biotech with several factors weighing on the sector including media and political focus on the high price of drugs, mixed first quarter results, slower-than-expected new product launches, and increasing competition. Macroeconomic factors have also been playing a role in the sector’s performance.

The impact of these issues is more prominent in biotech stocks with the NASDAQ Biotechnology Index declining 14.5% year-to-date (YTD).

However, the sector’s fundamentals remain strong and mergers and acquisitions (M&As), product approvals and positive data flow should act as catalysts.

M&As to Pick Pace?

With the major price correction that has resulted in reasonable valuations, we could see several M&A agreements being announced as the year progresses. So far in 2016, some of the announced/completed acquisitions include Shire-Baxalta, Bristol-Myers (BMY) -Padlock, and Pfizer (PFE) -Anacor among others. Currently, Sanofi ( SNY) is looking to acquire cancer-focused Medivation – we expect a bidding war as Medivation has signed confidentiality agreements with many firms including Sanofi.

Meanwhile, small bolt-on acquisitions will continue. In-licensing activities and collaborations for the development of pipeline candidates have also increased significantly. Several pharma companies are focusing on in-licensing mid-to-late stage pipeline candidates that look promising, instead of developing a product from scratch, which involves a lot of funds and time.

Small biotech companies are open to such deals with most of them finding it challenging to raise cash, thereby making it difficult to survive and continue with the development of promising pipeline candidates. Therefore, it makes sense to seek deals with pharma companies sitting on huge piles of cash.

We recommend biotech stocks that have attractive pipeline candidates or technology that can be used for the development of novel therapeutics. Therapeutic areas attracting a lot of interest include central nervous system disorders, hepatitis C virus (HCV) and immunology/inflammation.

Another highly lucrative area is immuno-oncology as these therapies have the potential to change the treatment paradigm for cancer -- they basically use the natural capability of the patient's own immune system to fight the cancer. Major players in this field include Bristol-Myers, AstraZeneca, Merck (NYSE:MRK) and Roche.

Deals targeting immuno-oncology are being inked by companies like Pfizer, Merck KGaA, Bristol-Myers, AstraZeneca and Incyte. Companies like Kite are also advancing in this area.

Another trend being witnessed is the divestment of non-core business segments. Companies like Pfizer, UCB, Novartis, Glaxo and AstraZeneca have all been a part of this trend. The monetization of non-core assets allows these companies to focus on their areas of expertise.

Restructuring activities are also gaining momentum as large pharma companies look to cut costs and streamline operations. Most of these companies are re-evaluating their pipelines and discontinuing programs with an unfavorable risk-benefit profile.

New Products Should Gain Traction in 2H16

Highly-awaited new products that gained approval last year should contribute significantly to revenues. Some of the important new product approvals include Vertex’s cystic fibrosis treatment, Orkambi, Amgen’s (AMGN) heart failure treatment, Corlanor, Pfizer’s cancer treatment, Ibrance, Novartis’ psoriasis treatment, Cosentyx, PCSK9 inhibitors – Amgen’s Repatha and Sanofi/Regeneron’s Praluent, Roche’s advanced melanoma treatment, Cotellic and Gilead’s Genvoya (HIV).

Meanwhile, so far in 2016, the FDA has approved 15 new drugs including Epclusa (HCV) Ocaliva (rare, chronic liver disease), Zinbryta (multiple sclerosis), Tecentriq (urothelial cancer), Venclexta (chronic lymphocytic leukemia in patients with a specific chromosomal abnormality), Taltz (moderate-to-severe plaque psoriasis), Cinqair (severe asthma) and Zepatier (HCV) among others. The FDA also expanded the label of cancer drugs like Kyprolis, Imbruvica and Xalkori.

Biosimilars Gaining Importance

With the FDA approving the first biosimilar in the U.S. (Zarxio, a biosimilar version of Amgen’s blockbuster drug, Neupogen), the floodgates have opened. While biosimilars have been available in the EU for quite a while, there was no regulatory pathway for biosimilars in the U.S.

Biosimilars should cut healthcare costs and provide a large number of patients with access to much needed biologic treatments. According to information provided by Express Scripts, about $250 billion could be saved in the next decade (2014 – 2024) if biosimilars for 11 products including Neupogen, Avastin, Epogen, Humira, Neulasta, Remicade and Rituxan are approved. According to the company, Neupogen biosimilars alone represent potential savings of about $5.7 billion.

Apart from Novartis, companies like Merck, Amgen, Pfizer, Biogen ( BIIB) and Allergan (NYSE:AGN_pa) are targeting the highly lucrative biosimilars market.

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