The Pharma Year in Review: 2017By
As we near the end of 2017, what were the major news stories impacting the pharmaceutical industry and the pharmaceutical manufacturing value chain?
DCAT Value Chain Insights provides a list of the Top 10 news developments for 2017 from mergers and acquisitions, to key drug approvals, to policy debates.
The Top 10 stories for 2017
Looking back at 2017 thus far (as of December 4, 2017), what were the Top 10 new stories (see Table I ). The editorial staff of DCAT Value Chain Insights highlights the key news developments.
1. The changing fortunes of Teva. The year 2017 has been a difficult one for Teva Pharmaceutical Industries as the company seeks to turn around its financial performance. In November 2017, the company announced a new organization and leadership structure with a more detailed restructuring plan due to be announced in mid-December 2017. The plan is being led by Kåre Schultz, formerly president and chief executive officer (CEO) of H. Lundbeck A/S, who took over as president and CEO, effective November 1, 2017. Analysts point to Teva’s $40.5-billion acquisition of the generics business of Allergan (i.e., Actavis Generics) in 2016 as a main contributor to the company’s financial issues by increasing the company’s debt while facing underperformance in its generics business, particularly its US generics business, for which the company took a goodwill impairment charge of $6.1 billion in the second quarter of 2017. Key for Teva going forward is its performance in the generic-drug market, particularly in the US generics market, as well as navigating generic-drug incursion for its top-selling product, Copaxone (glatiramer acetate injection), a multiple sclerosis medicine, which had 2016 sales of $4.2 billion. In August 2017, the company updated a plan to include total staff reductions of 7,000 employees and the closing or divestment of 15 manufacturing plants.
|Table I: Top 10 Pharmaceutical News Stories in 2017.|
|Number 1||The changing fortunes of Teva.|
|Number 2||The formation of DowDuPont.|
|Number 3||Johnson & Johnson’s $30-billion acquisition of Actelion.|
|Number 4||Gilead Sciences’ $11.9-billion acquisition of Kite Pharma.|
|Number 5||Thermo Fisher Scientific’s $7.2-billion acquisition of Patheon.|
|Number 6||New drug approvals rebound.|
|Number 7||Avantor’s $6.5-billion acquisition of VWR.|
|Number 8||New leadership at the FDA.|
|Number 9||European Medicines Agency and pharmaceutical industry prepare for Brexit.|
|Number 10||Healthcare policy debate continues.|
Compiled by DCAT Value Chain Insights editorial staff.
2. The formation of DowDuPont. A mega merger in the chemical manufacturing value chain that required nearly two years to finalize was completed in August 2017 with the formation of DowDuPont, the combined company resulting from the merger of The Dow Chemical Company and DuPont. The deal, which was announced in December 2015, created a new number one global chemical company ahead of the previous number one company, BASF. Andrew N. Liveris, formerly chairman and CEO of Dow, became chairman of DowDuPont, and Edward D. Breen, formerly chairman and CEO of DuPont, became CEO of DowDuPont. DowDuPont has three divisions (Agriculture, Materials Science, and Specialty Products), and it plans to separate each business into independent companies. The Specialty Products Division houses the company’s pharmaceutical ingredients business, including excipients. The company added to its excipients business in November 2017, when it completed a business swap with FMC Corporation under which FMC acquired a portion of the former DuPont crop protection business and DowDuPont acquired FMC’s health and nutrition business, which included its excipient business.
3. Johnson & Johnson’s $30-billion acquisition of Actelion. By far, the largest pharmaceutical deal thus far in 2017 is Johnson & Johnson’s (J&J) $30-billion acquisition of Actelion, a Swiss pharmaceutical company, a deal completed in June 2017. For J&J, the acquisition of Actelion adds a rare-disease focus to the company’s pharmaceutical business, which posted 2016 sales of $33.4 billion. The move provides J&J with a specialist in pulmonary arterial hypertension with a $1-billion plus franchise as J&J seeks to add assets to offset generic competition for its top-selling pharmaceutical, Remicade (infliximab), an anti-inflammatory drug. Led by its pulmonary arterial hypertension franchise, Actelion had 2016 product sales of CHF 2.41 billion ($2.47 billion). Actelion’s pulmonary arterial hypertension franchise sales were driven by its top-selling product, Tracleer (bosentan), an orally available endothelin receptor antagonist for treating pulmonary arterial hypertension, which posted 2016 sales of CHF 1.02 billion ($1.05 billion) and Actelion’s next-generation pulmonary arterial hypertension product, Opsumit (macitentan), which posted 2016 sales of CHF 831 million ($853 million)..
4. Gilead Sciences’ $11.9-billion acquisition of Kite Pharma. In a power play to position itself in the emerging field of cell therapies, Gilead Sciences acquired Kite Pharma, a company engaged in the emerging field of cell therapy, which uses a patient’s own immune cells to fight cancer, for $11.9 billion. The deal was announced in August 2017 and completed in October 2017. Kite Pharma has developed engineered cell therapies that express either a chimeric antigen receptor (CAR) or an engineered T-cell receptor (TCR), depending on the type of cancer. In October 2017, the FDA approved Yescarta (axicabtagene ciloleucel), a CAR-T therapy to treat adults with certain types of large B-cell lymphoma. Yescarta was the second CAR-T therapy to be approved by the FDA in 2017. In August 2017, the FDA approved Novartis’ Kymriah (tisagenlecleucel) as the first CAR-T therapy available in the US. The approval was for certain pediatric and young adult patients with a form of acute lymphoblastic leukemia.
5. Thermo Fisher Scientific’s $7.2-billion acquisition of Patheon. On the supplier side, the largest deal in 2017 was Thermo Fisher Scientific’s $7.2-billion acquisition of Patheon, a contract development and manufacturing organization of active pharmaceutical ingredients (APIs) and drug products. The deal, which was completed in August 2017 and announced in May 2017, provides Thermo Fisher with small- and large-molecule development and manufacturing capabilities as well as formulation development and drug product manufacturing. Thermo Fisher’s products and services support research, clinical trials, and production and includes clinical trials logistics services. Patheon, which has approximately 9,000 employees worldwide, generated 2016 revenue of approximately $1.9 billion and is now part of Thermo Fisher’s Laboratory Products and Services segment.
For Patheon, its acquisition by Thermo Fisher continued a multiyear process for Patheon in becoming an end-to-end contract services provider of active ingredients (both small molecules and biologics) and its historical core competency in formulation development and drug-product manufacturing. The key deal for Patheon dates back to 2014 with the formation of DPx Holdings B.V., privately owned by the private-equity firm JLL Partners (51%) and Royal DSM (49%), which was the result of a $2.65-billion deal between Patheon and DSM completed in March 2014. Since 2012, in addition to DSM Pharmaceutical Products, Patheon has been active on the acquisition front with key acquisitions to build both its active ingredient service capabilities and formulation development and drug product manufacturing capabilities: Banner Pharmacaps, Gallus BioPharmaceuticals, Agere Pharmaceuticals, IRIX Pharmaceuticals, and a former Roche API manufacturing facility in Florence, South Carolina.
6. New drug approvals rebound. After dipping to a recent low in 2016, the number of new molecular entities (NMEs) approved by the US Food and Drug Administration (FDA), rebounded in 2017. As of mid-November 2017, FDA’s Center for Drug Evaluation and Research had approved 40 NMEs, well ahead of the 22 NMEs approved in all of 2016. The 22 NME approvals in 2016 was a drop compared with the 45 NMEs approved in 2015 and was the lowest total of NME approvals since 2010 when 21 NMEs were approved. From 2011 to 2015, NME approvals had been on an upward trajectory (with the exception of 2013) with 30 NMEs approved in 2011 and 39 in 2012. The exception was in 2013, which had a decline to 27 NMEs, but levels jumped again to 41 NMEs in 2014 and peaked at a recent high of 45 approvals in 2015.
7. Avantor’s $6.5-billion acquisition of VWR. In another large-scale deal of suppliers, Avantor, a supplier of ultra-high-purity materials for the life sciences and advanced technology industries, completed its acquisition of VWR, a provider of product, supply-chain, and service solutions to laboratory and production customers, for $33.25 in cash per share of VWR common stock reflecting an enterprise value of approximately $6.5 billion. The companies had announced the acquisition in May 2017 and completed the acquisition in November 2017. Avantor is the corporate name of the new company, and the VWR name will remain in place as one of the company’s selling channels. VWR will operate as a wholly owned subsidiary of Avantor. Michael Stubblefield, CEO of Avantor, will lead the combined company.
Avantor’s acquisition of VWR creates a consumables-focused solutions and services provider to the life sciences and advanced technologies industries as well as education, government, and research institutions. Avantor provides performance materials and solutions for the production and research needs of approximately 7,900 customers across the biotechnology, pharmaceutical, medical device, diagnostics, aerospace and defense, and semiconductor industries. Avantor’s product portfolio includes more than 30,000 products. VWR, headquartered in Radnor, Pennsylvania, is a provider of product and service solutions to laboratory and production customers with sales in excess of $4.5 billion in 2016. The acquisition will build on each company’s strengths, including Avantor’s cGMP manufacturing processes and exposure to emerging markets and VWR’s position across the Americas and Europe.
8. New leadership at the FDA. The change in Administration with the election of Donald Trump also brought a new Commissioner of the US Food and Drug Administration (FDA). Scott Gottlieb, MD, became the new FDA Commissioner in May 2017. Gottlieb, a physician, medical policy expert, and public health advocate previously served as the FDA’s Deputy Commissioner for Medical and Scientific Affairs and before that, as a senior advisor to the FDA Commissioner.
Among the policy priorities set by Gottlieb are: improvements to the generic-drug review process as part of a plan to improve drug competition; addressing the opioid drug crisis, including ways to further development of abuse-deterrent technologies, including for generic drugs; and implementation of the 21st Century Cures Act, which was signed into law in December 2016 and is designed to help accelerate medical product development.
In addition, the US Senate is holding hearings on President Trump’s nominee for the US Department of Health and Human Services (HHS), Alex Azar, a former executive at Eli Lilly and Company and former HHS Deputy Secretary and General Counsel. Azar was nominated to be the new HHS Secretary following the resignation of Tom Price as HHS Secretary in September 2017. The US Senate Committee on Finance holds a confirmation hearing and formally votes on his nomination. Depending on the outcome of the vote, the nomination would then be considered by the full Senate.
9. European Medicines Agency and pharmaceutical industry prepare for Brexit. In preparation for the UK’s withdrawal from the European Union (i.e., Brexit), the member states of the European Union (EU) selected Amsterdam, the Netherlands as the new headquarters for the European Medicines Agency (EMA), the EU’s pharmaceutical regulatory authority, now headquartered in London. The agency now has 16 months to prepare for the move and take up its operations in Amsterdam by March 30, 2019. The EMA has been based in London since it was established in 1995. It currently employs nearly 900 staff members.
Nine associations representing the European and British pharmaceutical, biotechnology and over-the-counter medicines industries have stressed the importance of securing cooperation and a timely agreement between the UK and EU on medicines regulation as the parties negotiate trade policy post-Brexit. These associations include: the European Federation of Pharmaceutical Industries and Associations (EFPIA), which represents European innovator, research companies and national pharmaceutical associations in Europe; Medicines for Europe, which represents generic-drug manufacturers in Europe; EuropaBio, which represents European biotechnology companies; the European Confederation of Pharmaceutical Entrepreneurs (EUCOPE), which represents small-to-medium-sized innovator pharmaceutical companies; the Association of the European Self-Medication Industry (AESGP), which represents manufacturers of non-prescription or OTC medicines in Europe; the Association of the British Pharmaceutical Industry (ABPI), which represents pharmaceutical manufacturers in the UK; the British Generic Manufacturers Association (BGMA), which represents generic-drug companies and suppliers in the UK; the UK BioIndustry Association (BIA), which represents biotechnology companies in the UK; and Proprietary Association of Great Britain (PAGB), which represents OTC manufacturers in the UK.
10. Healthcare policy debate continues. Healthcare reform took center stage in US policy-making and debates in 2017. In 2017, Congress considered measures to repeal and replace the Patient Protection and Affordable Care Act (i.e., Affordable Care Act), the healthcare legislation signed into law by President Barack Obama in March 2010 although no legislation was passed as of early December 2017. As part of the healthcare debates, the issue of drug pricing also emerged for policy consideration with legislative proposals calling for the federal government to negotiate lower prescription drug prices for Medicare and requiring drug manufacturers to publically release data and information justifying any significant price increase.