The Road Ahead for Sanofi, GSK, and AstraZeneca

Sanofi, GlaxoSmithKline, and AstraZeneca released their earnings last week. How did these companies fare, and how did the sector leaders in specialty pharmaceuticals and generics as well as biologics perform? DCAT Value Chain Insights (VCI) examines 2014 performance and what lies ahead. 

Sanofi, GlaxoSmithKline (GSK), and AstraZeneca were among the companies releasing their earnings last week. How is Sanofi progressing in its search for a new CEO, and what can GSK expect following the closing of its three-part deal with Novartis expected later this year, and will AstraZeneca’s late-stage pipeline sustain its growth objectives? Also, how did specialty pharmaceuticals and generic companies, such as Teva Pharmaceutical and Actavis, perform, and what are the prospects of Amgen, Biogen Idec, and Gilead Sciences? DCAT Value Chain Insights (VCI) examines 2014 highlights and the near-term outlook.

A roundup of activity

Sanofi. The key issue for Sanofi in 2015 will be the selection of a new chief executive officer (CEO) following the departure of former  CEO Christopher Viehbacher in October 2014. On an analysts’ call last week, Serge Weinberg, Sanofi’s chairman and interim CEO, said that the company was making “good progress” in it selection process for a new CEO and expects to make an announcement in the first quarter of 2015. A new Sanofi CEO will be inheriting a company that performed well in 2014, particularly in emerging markets, which is the company’s top geographic segment, slightly ahead of the US.

Sanofi reported overall revenues of EUR 33.770 billion ($38.214 billion) in 2014, up 4.9% at constant exchange rates (CER) compared to 2013. Pharmaceutical sales were up 4.4% (CER) to $27.720 billion ($31.373 billion). Revenues from the company’s growth platforms increased 10.7% (CER) to EUR 25.802 billion ($29.207 billion). The company’s growth platform includes its diabetes franchise, vaccines, consumer healthcare, Genyzme, animal health, and other innovative products and accounted for 76.4% of the company’s total sales in 2014. Its top-selling product overall and in its diabetes franchise, Lantus (insulin glargine), saw sales gains of 12.1% (CER) in 2014 compared to 2013 to EUR 6.344 billion ($7.180 billion).

On a geographic basis, emerging markets are the company’s largest segment, surpassing sales in either the US or Western Europe. Sanofi’s sales in emerging markets in 2014 were EUR 11.347 billion ($12.843 billion), up 9.3% (CER) compared to 2013. Sales in China, its largest national market in emerging markets increased 8.8% (CER) to EUR 1.603 billion ($1.814 billion). Sales in Brazil were EUR 1.382 billion ($1.564 billion), up 6.9% (CER), and sales in Russia were up 7.1% (CER) to EUR 813 million ($920 million). US revenues were up 8.2% (CER) to EUR 11.339 billion ($12.834 billion), and sales in Western Europe were flat at EUR 7.865 billion ($8.900 billion).

GlaxoSmithKline (GSK). For GSK CEO Sir Andrew Witty, 2015 will be an important year to see the closing of its three-part deal with Novartis, announced in 2014, as well as measures to counter downward sales pressures, including a possible initial public offering (IPO) of Viiv Healthcare, its HIV specialist company formed with Pfizer in 2009 with Shionogi joining as a 10% shareholder in October 2012.

GSK reported total group turnover for 2014, including divestments completed in 2013, of £23.006 billion ($35.179 billion), down 7% (CER). Revenues of pharmaceuticals and vaccines were down 6% (CER) overall, with challenging conditions particularly in the US primary care market, and revenues from its consumer healthcare business were down 11%. Pharmaceutical sales were £15.478 billion ($23.667 billion), down 5% (CER) year over year, and vaccine sales declined 1% (CER) to £3.192 billion ($4.880 billion). The US, the company’s largest geographic market, had an overall sales decline of 11% (CER) to £7.340 billion ($11,222 billion). Sales in Europe were down 2% (CER) to £6.412 billion, and sales in emerging markets were up 4% (CER) to £6.193 billion. Pharmaceutical and vaccines sales in emerging markets grew 5% and increased 1% in Japan. In Europe, sales were flat. These performances were offset by a 10% decline in US pharmaceutical and vaccines sales following formulary and contract changes to the company’s key respiratory product, Advair (fluticasone propionate and salmeterol). In the US, pharmaceuticals and vaccines turnover declined 10% (CER) to £4,980 million ($7.615 billion) with sales of pharmaceuticals down 12% (CER) and vaccines flat. Global sales of Advair were down 15% (CER) overall to £4.229 billion ($6.464 billion). The company expects global Seretide/Advair sales to continue to decline in 2015 given sustained price pressure in the US and Europe, generic competition in Europe, and continued uptake of the company’s new respiratory portfolio.

Key for GSK in 2015 is the completion of its proposed three-part transaction with Novartis. In a deal that is expected to close in the first half of 2015, GSK is acquiring Novartis’ vaccines business (excluding influenza vaccines), creating a consumer healthcare joint venture with Novartis, and divesting its marketed oncology portfolio, related R&D activities, and rights to two pipeline AKT inhibitors to Novartis. GSK is selling its oncology business to Novartis for $16 billion and has announced it will provide £4 billion ($6.1 billion) of the net proceeds to shareholders subject to approvals.

On a smaller scale, GSK is evaluating an IPO of ViiV Healthcare, its specialist HIV company. In 2014, Viiv Healthcare reported sales of £1.498 billion ($2.290 billion), up 15%. At a conference call with analysts last week, GSK said it continues to evaluate options for a potential IPO of its minority stake in Viiv Healthcare and expects to provide an update with its second quarter 2015 results.

AstraZeneca. Following an unsuccessful effort by Pfizer to acquire AstraZeneca in 2014, AstraZeneca is looking to its late-stage pipeline to improve the company’s growth prospects. In 2014, AstraZeneca reported a 3% (CER) increase in revenues to $26.095 billion. Growth platforms were up 15% and contributed 53% of total revenues at $13.928 billion. Overall, the company had six product approvals in 2014, which included four new molecular entities (NMEs) approved in the US. AstraZeneca received FDA approval for the following: Farxiga (dapaglifozin) for treating Type 2 diabetes; the orphan drug Myalept (metreleptin); Movantik (naloxegel), a drug to treat opiod-induced constipation in adults with chronic non-cancer pain; and Lynparza (olaparib) for treating advanced ovarian cancer.In the US, sales increased 4% (CER) to $10.120 billion, and sales in Europe declined 1% (CER to $6.638 billion. Sales in emerging markets were up 12% (CER) to $5.827 billion, with sales in China up 22% (CER) to $2.242 billion, making China’s the company’s second largest national market behind the US.

In commenting on the results, AstraZeneca CEO Pascal Soriot said: “2014 was a remarkable year for AstraZeneca. We achieved a record six product approvals as we accelerated our pipeline across all main therapy areas. Alongside this, we delivered four quarters of revenue growth, with growth platforms now contributing over half of our revenues. Our strong performance in emerging markets is a particular highlight, with China becoming our second largest national market while the delay in the introduction of Nexium generics in the US helped to direct additional investment towards our launch brands and our rapidly advancing pipeline. Our guidance for 2015 reflects our focus on creating value by investing in our new brands and exciting pipeline while we continue improving productivity to protect our profitability in the face of patent expiries. With the depth of our science and the momentum we have built across our organization, we are on track to return to growth by 2017 and are well positioned to deliver our long-term goals.”

In terms of its pipeline, as of December 31, 2014, AstraZeneca’s pipeline included 133 projects, of which 118 are in the clinical phase of development. It has 13 NME projects currently in late-stage development, either in pivotal studies or under regulatory review. During 2014, across the portfolio, 50 projects successfully progressed to their next phase. This includes two first launches and four first approvals in a major market, and 14 NME progressions. In addition, 21 projects entered first-in-human testing. Nine projects were withdrawn.

Specialty pharma and generic companies forge ahead 

Actavis. Key for Actavis in 2015 is the completion of its proposed $66-billion acquisition of the specialty pharmaceutical company, Allergan. The transaction, subject to shareholder approval and customary closing conditions, has been unanimously approved by the boards of directors of Actavis and Allergan and is supported by the management teams of both companies. The companies’ shareholder vote is scheduled for March 10, 2015. If the deal proceeds as planned, a combined company of Actavis and Allergan would have 2015 pro forma revenues in excess of $23 billion, making it one of the top 10 global pharmaceutical companies. The transaction is anticipated to close in the second quarter of 2015. The combined company will be led by Brent Saunders, CEO and president of Actavis, and Paul Bisaro, who will remain as executive chairman of the board of Actavis. Actavis acquired Allergan following an unsuccessful effort by Valeant Pharmaceuticals to acquire Allergan. The proposed acquisition of Allergan was the second major deal for Actavis in 2014 following its $28-billion acquisition of Forest Laboratories, which was completed in July 2014. Also, in November 2014, Actavis completed its $675 million acquisition of the specialty pharmaceutical company, Durata Therapeutics. Actavis will be reporting its 2014 results on February 18, 2015.

Teva Pharmaceutical. Teva Pharmaceutical Industries President and CEO Erez Vigodman outlined the company’s performance in 2014 and priorities for 2015. In 2014, Teva reported sales of $20.272 billion, essentially flat from 2013, when it reported revenues of $20.314 billion. The company has two main segments: generics and specialty medicines. Sales in generics were down slightly in 2014 to $9.814 billion from $9.902 billion in 2013. Sales in its specialty medicines segment were $8.560 billion in 2014, up from $8.388 billion in 2013.

Key to Teva in 2014 and going ahead in 2015 is the product lifecycle management of its top-selling drug, Copaxone, a drug to treat multiple sclerosis (MS). In 2014, the drug had revenues of $4.3287 billion. The US Orange Book patents covering Copaxone (20 mg) expired in May 2014. To combat generic-drug incursion for Copaxone, Teva developed a new formulation, Copaxone 40 mg/mL, which is administered three times a week. The new formulation, which was approved by the US Food and Drug Administration in January 2014, allows for a less frequent dosing regimen administered subcutaneously for patients with relapsing forms of MS.

Key priorities for Teva in 2015 are continuation of costs saving and efficiencies, managing its specialty medicines product lifecycle as well as advancing its specialty medicines portfolio, and advancing its generic products. In 2014 in its generics segment, the company launched 19 product in the US, 209 in Europe, and 87 in the rest of the world, which delivered approximately $1.0 billion in revenues in 2014 from these new launches. In its specialty medicines segment, it successfully launched four new products with 2014 revenues of approximately $200 million. The company said it has a strong focus on its pipeline and on 2015-2019 new product launches. On a cost basis, in 2014, the company achieved $600 million in net cost reductions and is targeting an additional $500 million in 2015. Also the company is on track to achieve average cost per 1,000 tablets (CPU) of less than $10 and migrate 60% of its capacity to low-cost locations (CPU of $6-7) in five years.

Biologics majors report strong results

Amgen. Amgen reported total revenues in 2014 of $20.063 billion in 2014, up 7% year over year. In 2015, the company expects total revenues to be in the range of $20.8 billion to $21.3 billion. Key for Amgen is 2014 and going forward in 2015 is the performance of its two top-selling drugs: Enbrel (etanercept), a drug to treat psoriasis and rheumatoid arthritis, and Neulasta (pegfilgrastim), a drug to reduce infections in patients receiving chemotherapy. Enbrel and Neulasta were the company’s two top-selling drugs in 2014. Neulasta had sales of $3.649 billion, up 5% year over year, and Enbrel had sales of $4.404 billion, up 3%. A key issue for Amgen now and going forward is to diversify its portfolio and generate revenue from new products, something particularly important as Neulasta faces both US and European patent expiration in 2015 with the US patent expiring in October 2015 and the EU patent in February 2015 although supplemental protection for the pegylated granulocyte-colony stimulating factor in certain EU countries, France, Germany, Italy, Spain, and the United Kingdom, expires in 2017, according to the company’s annual filing.

Gilead Sciences. 2014 was a strong year for Gilead Sciences, led by Sovaldi (sofosbuvir), the company’s oral drug to treat chronic hepatitis C virus infection. Overall, revenues increased to $24.9 billion in 2014, up from $11.2 billion in 2013. Total product sales during 2014 were $24.5 billion compared to $10.8 billion in 2013. For 2014, product sales in the US were $18.1 billion compared to $6.6 billion in 2013, and in Europe, product sales were $5.1 billion compared to $3.3 billion in 2013. For 2014, antiviral product sales were $22.8 billion compared to $9.3 billion in 2013. The increase was primarily driven by sales of Sovaldi (sofosbuvir 400 mg), which launched in December 2013 in the US and in January 2014 in Europe, and Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), which launched in the US in October 2014.

Biogen Idec Biogen Idec reported full-year revenues of $9.7 billion, a 40% increase versus 2013. Interferon revenues, including Avonex and Plegridy, were $3.1 billion, consisting of $2.0 billion in US sales and $1.1 billion in sales outside the US. Revenues for Tecfidera (dimethyl fumarate), the company’s small-molecule drug to treat relapsing MS were $2.9 billion, consisting of $2.4 billion in US sales and $483 million in sales outside the US. Revenues from Tysabri (natalizumab), also a drug to treat relapsing MS were approximately $2.0 billion, consisting of $1.0 billion in US sales and $934 million in sales outside the US. Net revenues relating to Rituxan and Gazyva from the company’s unconsolidated joint business arrangement were $1.2 billion.

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