Novartis Executives Highlight Company’s Growth StrategyBy
For its first “Meet Novartis Management” investor day, Novartis gathered more than 20 of its top executives, drawn from the leadership of its Pharmaceuticals, Alcon, and Sandoz Divisions, and the Novartis Institutes for BioMedical Research (NIBR) to meet with approximately 100 investors and analysts in Basel, Switzerland to outline the company’s strategy following its recent portfolio review in April 2014. Novartis announced in April that it had reached a definitive agreement with GlaxoSmithKline plc (GSK) in a three-part transaction to acquire GSK’s oncology products, to divest its vaccine business (excluding flu) to GSK, and create a joint venture for consumer healthcare with GSK, and in a separate transaction agreed to divest its animal health business to Eli Lilly. Subject to customary closing approvals, its deal with GSK is expected to close in the first half 2015, and the transaction with Eli Lilly is expected to close in the first quarter of 2015.
At the meeting, the Novartis executives emphasized the group’s strategic priorities of innovation, growth, and productivity. To that end, part of its plan involves the creation of a shared services organization, Novartis Business Services (NBS), which is taking steps to improve profitability by generating synergies across businesses by harmonizing services across the company. The scope of NBS covers more than $6 billion in expenses and complements other ongoing productivity initiatives, including those involving the company’s manufacturing footprint. At its meeting, Novartis executives outlined key highlights from its Pharmaceuticals, Alcon, and Sandoz Divisions as well as from NIBR.
“Pharmaceuticals is preparing for a new growth phase, driven by greater depth in five business areasâ€”oncology, dermatology, heart failure, respiratory, and cell therapyâ€”to make a real difference in patients’ lives while at the same time delivering significant returns on investment and contributing to margin expansion over time,” said David Epstein, head of the Pharmaceuticals Division, in a company release.
In oncology, Novartis says its business ranks number two in sales worldwide and points to specific innovation, such as
CARTs (autologous patient T-cells reprogrammed to kill cancer cells) as a new therapy option. In other developments, the company expects to complete a Phase III trial on LEE011 (a highly selective CDK4/6 inhibitor), a first-line hormone receptor-positive treatment for advanced breast cancer by the end of this year. It also offered positive projections for Jakavi (ruxolitinib), a drug to treat myelofibrosis (a disorder of the bone marrow), and recently presented data on the drug in treating polycythemia vera (PV) (a rare blood disease in which the body makes too many red blood cells). Novartis estimates that if the PV indication is approved, peak sales of the drug can exceed $1 billion, making it one of 14 blockbusters that the company’s Pharmaceuticals Division is projecting to have by 2018.
Key products in its dermatology portfolio include AIN457 (secukinumab), a fully human antibody targeting IL-17A to treat moderate-to-severe plaque psoriasis, which is expecting its first regulatory decisions at the end of 2014 and early 2015. Regulatory submissions for secukinumab in the European Union (EU) and US were completed in 2013. Phase III results for secukinumab in moderate-to-severe plaque psoriasis were first presented in October 2013, with additional results to be presented in 2014 for both moderate-to-severe plaque psoriasis and arthritic conditions (psoriatic arthritis and ankylosing spondylitis). Dermatology also now includes the investigational compound LDE225 (sonidegib hedgehog inhibitor) in basal cell carcinoma, the most common form of skin cancer. LDE225 was submitted for regulatory submission in the EU in the second quarter of 2014, and additional worldwide submissions are underway.
The company is also advancing two key cardiovascular drugs: LCZ696 to treat chronic heart failure and RLX030 (serelaxin) to treat acute heart failure. The company plans to submit LCZ696 for treating heart failure with reduced ejection fraction in the US by the end of 2014 and in the EU in the first quarter of 2015. The company is waiting for clinical data for RLX030, which is expected to be completed in the second half of 2016 with interim analysis anticipated for the second half of 2015. In respiratory, the company is advancing Ultibro Breezhaler (indacaterol/glycopyrronium), a maintenance bronchodilator treatment to relieve symptoms in adult patients with chronic obstructive pulmonary disease (COPD).
Novartis also formed a new Cell and Gene Therapy Unit to advance the company’s cell therapy portfolio, which includes programs such as Facilitating Cell Therapy Platform (FCRx) and CART. Through multiple CART programs, Novartis is pursuing personalized cellular immuno-oncology therapies for both hematological and solid tumors.
These five business areas aim to build on the division’s growth platform of blockbuster products that have exclusivity until 2018 and beyond, including Lucentis (ranibizumab), a drug to treat wet age-related macular degeneration (wet AMD), macular edema caused by a blocked blood vessel in the eye, and diabetic macular edema, and Gilenya (fingolimod), a drug to treat relapsing forms of multiple sclerosis. Novartis recently expanded its wet AMD platform with the acquisition of exclusive rights to Fovista an anti-platelet-derived growth factor therapy to treat wet AMD.
Alcon, the company’s eye-care division, has three franchises: surgical, ophthalmic pharmaceuticals, and vision care. In ophthalmic pharmaceuticals, a key product in the glaucoma market is Simbrinza (brinzolamide/brimonidine tartrate ophthalmic suspension), a beta-blocker-free/timolol-free fixed-dose combination, which the company expects to be a growth driver for Alcon by providing additional treatment possibilities for patients who cannot tolerate beta-blockers. It was approved in the US in April 2013 and received a positive opinion from an EU regulatory advisory committee in May 2014. Alcon also has a strong pipeline of pharmaceuticals for retinal treatments, including RTH258 and LFG316, which target wet and dry age-related macular degeneration (AMD). RTH258, formerly known as ESBA 1008, is a compound in development for the treatment of neovascular AMD and has potential for additional indications. LFG316 is in development for geographic atrophy, an advanced form of dry AMD.
Novartis projects strong growth for Sandoz, the company’s generic-drug business, based on industry projections for strong growth for differentiated generics and biosimilars. “Future patent expiries remain strong,” said Richard Francis, Sandoz Division Head, “but there is a shift to complex products, validating the Sandoz strategy, which is deeply rooted in innovation,” in a company press release. On an industry level, from 2007 to 2012, the global sales of products set to lose patent protection amounted to $198 billion, with 30% from differentiated products. From 2013 to 2018, that number is expected to rise to $215 billion, with 50% from differentiated products, according to estimates provided by Novartis. In line with that trend, Sandoz has grown its differentiated portfolio from 32% to 45% of total sales from 2008 to 2013, at a compound annual growth rate (CAGR) of nearly 12%. For the company, generic injectables represent one area of growth, with more than $2 billion of sales in 2013, up by a CAGR of 17% over the last five years, and generic ophthalmics and dermatology products are other areas.
Novartis estimates that Sandoz holds a 54% of the global biosimilars market. Sandoz had 2013 biosimilar sales of more than $400 million. Sandoz has three biosimilar products on the market and six molecules in Phase III clinical trials or the registration preparation phase. Additionally, Sandoz is also advancing a broad operating improvement program, Project Compete, which ran from 2009 to 2013, by which the company reduced annual costs by more than $500 million and generated $2.5 billion in cost savings.
Novartis Institute for BioMedical Research (NIBR)
Novartis also discussed NIBR’s innovation strategy, noting that approximately three-quarters of the company’s Phase III clinical pipeline were generated from NIBR. NIBR has delivered to the development new drugs for a spectrum of diseases, ranging from common (e.g., LCZ696 for heart failure, AIN457 for psoriasis, KAE609 for malaria, QAW039 for asthma) to rare diseases (e.g., LCQ908 for familial chylomicronemia and LCI699 for Cushing’s disease). In oncology, NIBR has focused on targeted therapies and now has drug candidates for more than 10 pathways in late-stage clinical trials or registration.
NIBR is advancing the development of CART immunotherapies with the University of Pennsylvania (Penn), with a key product candidate, CTL019, now in early clinical trials for treating acute lymphoblastic leukemia and chronic lymphocytic leukemia. Through the collaboration with Penn, NIBR is expanding the CART pipeline to include additional hematological malignancies and solid tumors. The second component of NIBR’s immunotherapy portfolio is a suite of immune “checkpoint” antibodies: PD-L1, PD-1, LAG-3, and TIM-3. Other key drug candidates from NIBR include CGF166, a gene therapy for sensorineural hearing loss, and Phase LFG316 as a potential therapy for geographic atrophy, an advanced form of dry AMD. To combat muscle-wasting disorders, BYM338 (bimagrumab) is in clinical development for treating sporadic inclusion body myositis (sIBM) and is also being tested for sarcopenia and cachexia associated with COPD.