By pjain      Published July 18, 2020, 7:01 a.m. in blog Invest   

Health Pharmas R&D

r Major Pharmas R&D

Trends and Factors affecting Pharma Industry

Medicare Plans and Costs

  • Pelosi's plan would create an out-of-pocket maximum of $2,000 for Medicare beneficiaries

Drug Pricing and Regulation of Pharmas

Prescription drug companies are charging Americans prices that are three, four, or even ten times higher than what they charge for the same drugs in other countries.

  • The damage of high prices is indirect - "hurts the insurers"
  • As Private insurers use pharmacy benefit managers to negotiate drug rebates from pharmaceutical manufacturers in exchange for better coverage. The rebates often get paid to the PBMs or insurers
  • Consumer copays are often actually higher than 100% of the cost of generics
  • BUT BY FAR IT IS HURTING AND KILLING non-insured, cash paying patients.

  • Pharmas are by far the largest paying lobbyists in Washington - getting sausages made!

  • A lot of the proposals to fight drug pricing are basically bunk and hogwash - as politicians don't want to bite the hands that feed them.

  • Current rules prohibit the Department of Health and Human Services from negotiating drug prices on behalf of Medicare

  • Obamacare was a HUGE boon to pharmas as it greatly increased the coverage and market at top prices

  • Trump is bought up by pharmas

  • only proposal he has is to restrict raise drug prices faster than inflation,
  • "makes unreasonable noises" to import from Canada - he knows it is not possible as even Canada is complaining that would raise prices there as Pharmas fight back

Pharma Empty Threat to pull drugs sales from US,

  • Pharma Threat to pull drugs sales from US - unlikely as rest of world pays far less than US
  • Also drugs already being sold in US unlikely to be pulled

Pharma Cries that R&D will be hurt if US Profits fall

  • Pelosi's drug plan would reinvest savings from negotiated prices on NIH finding new treatments

Plan to reduce U.S. drug prices - Pelosi’s bill, a sweeping proposal

  • Penalize pharmaceutical companies that raise the price of their drugs faster than inflation
  • It would lift congressional restriction on negotiating lower prices on as many as 250 of the most expensive drugs per year and apply those discounts to private health plans across the U.S.
  • penalty on pharmaceutical companies that refuse to negotiate or fail to reach an agreement with the U.S. government, starting at 65% of the gross sales of the drug in question.
  • Would allow the U.S. government to negotiate lower prices on the costliest drugs each year,
  • CBO estimates would save Medicare $345b in 10 years mainly in Part D

  • PhRMA assoc opposed the plan, saying it gives “the federal government unprecedented, sweeping authority to set medicine prices in public and private markets while importing price controls from other countries that restrict access to innovative medicines.

JNJ R5 c133 b125? M356 y-2.7% ~7% 56y/

  • can buy - dividend play in era of 1.6% 10yr +ive Highly Diversified Medical conglomerate - Pharma,med-devices, consumer AND globally diverse +ive 70% of sales from biz in which it is #1 or #2 globally +ive Brands Strong - BandAid, Tylenol, Listerine - better profit margins than commodity
  • Recession Proof - People get sick and need help no matter the economic climate

-ive Hurt by opiod, talc - but valuation shrugged off!

Benefits from Aging of populations in most developing countries as well as rising wealth in EMs

  • Raising div ~7%/yr

  • c130 stagnant for 2 years

  • J&J is a highly diversified company. In effect, it runs as a conglomerate, giving its independent brands and divisions plenty of room to manage their own affairs.

  • SEG> consumer products for things such as baby and skincare.


  • RISK high-profile litigation over allegations that its iconic talcum powder is linked to cancer.

  • Stodgy - Founded 1886

SEG: Pharma

SEG: OTC onsumer

  • Makes over-the-counter consumer products such as Band-Aids, Neosporin and Listerine.

SEG: medical devices used in surgery.

  • SEG:Drugs.
  • RISK > pressure on drug pricing, and potentially harmful changes to the health care regulatory structure in the U.S.

  • RISK exposure to liability lawsuits

  • Will brush off talcum powder, fentanyl lawsuits - as not worse than rest and deep law pockets.

Older Tracking

  • 12/18 $100b punitive damages - wilfull even if "science says not needed"

ABT x c73 m129b y1.8% 47y/

  • 2017 acq medical-device firm St. Jude Medical
  • 2017 rapid-testing technology business Alere
  • 2013 spinoff abbvie

  • Like JNJ - steady boring low growth

SEG: OTC consumer esp nutrition

Similac infant formulas, Glucerna diabetes management products

SEG: branded generic drugs

SEG: medical devices

SEG: diagnostic products.

i-Stat diagnostics devices.

Tracking R7

Abbott said March 18 2020 that it received emergency Food and Drug Administration authorization to immediately ship 150,000 coronavirus tests to existing customers and would increase production to provide “up to 1 million tests per week.” Only $1.2 billion of the company’s $20 billion in debt is maturing over the short term, and the company has more than $4 billion in cash and is “more secure” than peers, with “less exposure to elective procedures,” according to the Jefferies report.

ABBV x R7 VALUE y5.5% 46annualRises

  • Spun off from Abbott Laboratories in 2013
  • TOP Humira for rheumatoid arthritis
  • AndroGel, a testosterone replacement therapy.

  • Pipeline includes more than 35 products across various stages of clinical trials.

Q2'2020 M=$170b PEf=8x y=4.8%

  • Closed on the $63 billion acquisition of Allergan bringing Botox and other beauty products.

SEG: Humira offpatent 2023, 60% of Revenue pre AGN acq, 38% post acq

  1. ONE Big Humira goes off-patent in 2023, the blockbuster drug that made up about 60% of the company's revenue.

With Allergan, Humira will account for only 38.4% of sales. And given that other drugs in AbbVie’s portfolio are likely growing faster than Humira, that portion will continue to fall.


  1. Tried to add neurology R&D - not successful - ph3 Depatux-M failed

  2. 2019 Diverse by acquiring AGN last year, as well as much larger, and both factors should bode well for ABBV. = The acquisition was under-appreciated last year, and the market is only beginning to appreciate ABBV. = Will help round out earnings

  3. M&A was done well - PE of biotech appled to less profitable AGN segment - market has NOT adjusted for new revenue mix
  4. Allergan $16b of VERY diversified billion dollar product lines cosmeticAesthetics $4.4b eyecare $2.3b botox $2b GI $1.9b neuro $1.2 womens $0.9
  5. Allergan best known for PROFITABLE aesthetic or cosmetic treatments such as Botox, Juvederm, and CoolSculpting, but Allergan also had a promising neuroscience division

PFE x selling off

PFE Keys

Been a value stock even before the coronavirus sell-off. But shares are now down 22% year-to-date which has put the shares on sale. It is paying a dividend, currently yielding 5.1%.

  • Pfizer shifts focus to cancer and biotech drugs By LINDA A. JOHNSON, AP Business Writer Pfizer Inc. is shifting its research focus to diseases that have high potential for big profits and for treatment improvements, such as cancer and Alzheimer's disease. ADVERTISEMENT The world's biggest drugmaker also is ending new research on conditions from obesity to heart disease, but research on drugs already in late-stage human testing will continue, spokeswoman Liz Power said Tuesday. Experts said such tweaking of research strategy is standard in the pharmaceutical industry ? and needed periodically as new competition and other factors affect revenue. Pfizer expects to spend up to $7.5 billion on research and development this year, a huge budget for the industry. "Even though it is very large, it is finite," Power said. Like most of its competitors, Pfizer has been reorganizing and cutting costs to deal with looming generic competition and a lack of blockbusters in its pipeline. Power said Pfizer needs to focus research, particularly costly late-stage human testing, on areas where patient needs aren't met by existing treatments, where there's a sizable commercial market and where the company has expertise and a good chance for scientific success. The New York-based company has identified six high-priority areas for future research: cancer, pain, inflammation, diabetes, Alzheimer's disease and schizophrenia. "They're basically looking at the largest-margin, largest-market indications," said analyst Steve Brozak of WBB Securities. Pfizer has increasingly been investing in cancer research and probably now will move into treatments for pain and inflammation that work through different mechanisms than its blockbuster Celebrex, he said. The focus on diabetes likely will be on the type linked to the Western obesity epidemic, and Alzheimer's also will be a huge market, given the aging population. And there are "no satisfactory cures whatsoever" for schizophrenia, Brozak added. Areas where the company is ending research, much of it still in early stages, include anemia, bone health, gastrointestinal disorders, muscle diseases, obesity and some approaches to osteoarthritis. The company also is dropping early research in four areas of cardiac disease: hardening of the arteries, high cholesterol, heart failure and peripheral arterial disease. Deutsche Bank pharmaceuticals analyst Barbara Ryan noted Pfizer has been among the top few drug companies that develop heart drugsa huge market given the aging population in developed countries. Pfizer markets the world's top-selling drug, cholesterol fighter Lipitor, which generates about $12 billion a year in revenue. However, it will lose its U.S. patent late in 2011, and there's already a generic version of a cholesterol drug from the same class, Zocor. Many heart drugs in other categories also have significant generic competition that is eroding sales of brand-name medicines. "We have a large number of highly effective (cardiovascular) drugs, and it's very difficult to demonstrate a big improvement above and beyond what exists, and that's really what the FDA and payers demand," said Ryan. Meanwhile, Pfizer on Tuesday gave its semiannual update for investors on its research pipeline. It now has 114 human studies of drugs in process and said that since its last update in February, the number in final human testing has grown from 16 to 25 ? 19 of them in its high-priority areas. Testing of 13 drugs, including four for rheumatoid arthritis, has been stopped since February. Biotechnology drugs, which generally are extremely profitable and so far have been insulated from generic competition by their complexity, will be a big part of that pipeline, particularly in cancer research.

Covid-19 Impact


  • Novavax getting $1.6 billion in federal aid for its coronavirus vaccine candidate

Major Pharmas

LLY x R5

Pharmaceutical company Eli Lilly We view LLY as a way to own a defensive sector that offers growth, improving fundamentals and an attractive valuation. Other defensive sectors, such as consumer staples, REITs, and utilities, have become expensive this year, leaving telecoms and healthcare as the only inexpensive non-cyclical sectors. With lots of leverage and a big 5G investment in telecoms, we like healthcare from an organic growth perspective. Within healthcare, LLY offers low to mid-teens earnings growth starting next year as many of LLY’s diabetes and cancer drugs have already won FDA approval, reducing risk. We also see LLY embracing a more patient-friendly approach to drug pricing as taking the steam out of political pressure for lower prices. Our sense is sentiment will start to improve for LLY as investors warm up to the company’s growth and a valuation well below long-term averages. - Mike Bailey, Director of Research at FBB Capital Partners

spun off its animal health business to focus on the higher margin human health business. Less patent risk than other drug companies and a diversified portfolio of drugs. Strong diabetes drug franchise. Pipeline contains a couple late stage cancer drugs which should be blockbusters if approved. 2% dividend yield along with attractive long-term earnings growth estimates.



  • one of 30 most favored by hedge funds


GSK R7 on historical PEf? x High Debt, Commodity

July'2020 M100b 14xf c42(32-48) y4.5% pay=28% DE=2.5x 5y$8%e10%

  • Historical PEf is 24x - but right now only 14x - worth 80% higher target!

SEG: Top Vaccine Maker - C19 opportunity

GlaxoSmithKline is the world’s largest vaccine maker, and the UK-headquartered company is relying on proven methods of making a vaccine.

Glaxo recognizes that the world will need billions of doses, and therefore are not worried if they are first to market with a vaccine. Many other vaccine makers will not have the capacity to match what GlaxoSmithKline can do quickly. And once its vaccine is ready — which, only started its trials in June — it can make large amounts

SEG: Pharma R&D Pipeline - Cancer, HIV

It has a huge pipeline of drugs, including options for cancer and HIV prevention.

SEG: consumer health - to spinoff

Makes Advil and Panadol.


GSK has a history of paying consistent quarterly dividends that tend to have a higher year-end dividend each year.

AZN x NoGrowth HighDebt phE=100xt 24f

July'2020 c61(37-61) b52 m b48 M=160b y=2.3% Pay=60% DE=1.7x 5yr$-2%e1%

  • Highly Diabetes dependent
  • UK based - neither tech/R&D nor tax advantage like Irish cos.

AstraZeneca PLC discovers, develops, and commercializes prescription medicines in the areas of oncology, cardiovascular, renal and metabolism, respiratory, autoimmunity, infection, neuroscience, and gastroenterology worldwide. Its marketed products include Arimidex, Casodex/Cosudex, Calquence, Faslodex, Imfinzi, Iressa, Lynparza, Nolvadex, Tagrisso, and Zoladex for oncology diseases; Atacand/Atacand HCT/Atacand Plus, Brilinta/Brilique, Crestor, Plendil, Seloken/Toprol-XL, Tenormin, and Zestril for cardiovascular diseases; and Bydureon, Byetta, Farxiga/Forxiga, Kombiglyze XR/Komboglyze, Onglyza, Qtern, Symlin, Xigduo/Xigduo XR for metabolic diseases. The company's marketed products also comprise Accolate, Bevespi Aerosphere, Bricanyl Respules, Bricanyl Turbuhaler, Daliresp/Daxas, Duaklir Genuair, Tudorza/Eklira, Fasenra, Oxis Turbuhaler, Pulmicort Turbuhaler/Pulmicort Flexhaler, Pulmicort Respules, Symbicort pMDI, and Symbicort Turbuhaler for respiratory diseases; Fluenz Tetra/FluMist Quadrivalen and Synagis for infection diseases; Movantik/Moventig, Seroquel IR/Seroquel XR, and Vimovo for neuroscience diseases; and Losec/Prilosec and Nexium for gastrointestinal diseases. The company serves primary care and specialty care physicians through distributors and local representative offices.

NVS x noGrowth, China Hurts its API, Debt controlled - diabetesDependence

July'20 R7 M$195b 14xf c88 b83 y3.5% pay=54% DE=0.7 5y$-2%e-7%

  • Historical PEF=21x but now 14x - 50% upside T $101

Issue: Bribes to doctors $729m fines in US

In June, it agreed to $729 million in fines with the U.S. government to settle charges it paid kickbacks to doctors and patients.

SEG: Cancer drugs

Novartis will start a Covid-19 PhaseIII clinical trial of their cancer drug, Jakafi, which was developed by Incyte and which Novartis sells the drug outside the U.S. Jakafi could help patients suffering severe immune overreactions caused by Covid-19. The drug could eliminate hospital intensive care and mechanical breathing assistance.

SEG: Sandoz generics

Sandoz, a well-known drug company. Sandoz plans on giving away 15 of its generic drugs that treat symptoms of COVID-19 to developing countries.


Novartis AG researches, develops, manufactures, and markets healthcare products worldwide. Its Innovative Medicines segment offers prescription medicines for patients and healthcare providers. It also provides ophthalmology, neuroscience, immunology, hepatology and dermatology, respiratory, cardio-metabolic, established, and cardiovascular, renal and metabolism medicine products.

SEG: Sandoz API

Active components and finished dosage forms of small molecule pharmaceuticals to third parties across a range of therapeutic areas, as well as finished dosage form anti-infectives. It also provides active pharmaceutical ingredients and intermediates primarily antibiotics; protein- or other biotechnology-based products, including biosimilars; and biotechnology manufacturing services.

NVO r7

July'19 c67(50=68) b60 - y2.3% pay=80% de=0 5yr$7%e10%

SEG: Diabetes and Obesity care

The Diabetes and Obesity care segment provides products in the areas of insulins, GLP-1 and related delivery systems, oral antidiabetic products, obesity, and other chronic diseases.

SEG: Biopharmaceuticals

The Biopharmaceuticals segment offers products in the areas of haemophilia, growth disorders, and hormone replacement therapy.


The company has a strategic alliance with Evotec AG to discover and develop small molecule therapies to treat patients suffering from diabetes, obesity, and co-morbidities, as well as has a research collaboration with Kallyope Inc.

It also has collaboration agreements with Lund University to develop stem cell-derived treatment for Parkinson's diseases; Staten Biotechnology B.V. to develop novel therapeutics for the treatment of dyslipidaemia; Medtronic plc to develop integrated digital solutions for people with diabetes; and bluebird bio, Inc. to develop in vivo genome editing treatments for genetic diseases.

The company was founded in 1923 and is headquartered in Bagsvaerd, Denmark.

SNY R7 b45

July'2020 c53(38-55) analysts Upgrading y3.2% Pay=50% DE=?? 5y$3.5%e-6%

Vaccines - leader in Covid-19 2020 vaccine - probably why at top of range

SEG: Other Drugs

  • Depakine for epilepsy.

SEG: Anti-Inflammatory, Autoimmune, Inflammation

  • Synvisc and Synvisc-One viscosupplements for osteoarthritis;
  • Stilnox for insomnia;
  • Allegra for seasonal allergic rhinitis and uncomplicated hives;
  • Thymoglobulin, an immunosuppressive and immunomodulating agent
  • Cerezyme and Cerdelga for Gaucher
  • Myozyme and Lumizyme for Pompe
  • Fabrazyme for Fabry
  • Aldurazyme for mucopolysaccharidosis Type 1;
  • Aubagio and Lemtrada for multiple sclerosis.
  • Dupixent for atopic dermatitis
  • Kevzara for rheumatoid arthritis
  • Cablivi to treat acquired thrombotic thrombocytopenic purpura

SEG: Cardiac

  • Eloctate and Alprolix to treat hemophilia
  • Mozobil for hematologic malignancies
  • Praluent, a cholesterol-lowering drug;
  • Multaq, an anti-arrhythmic drug for atrial fibrillation.
  • Plavix for atherothrombotic conditions
  • Lovenox for the prophylaxis, venous thromboembolism, and acute coronary syndrome;
  • Aprovel and CoAprovel anti-hypertensives;
  • Renagel and Renvela for patients undergoing dialysis;

SEG: Cancer

  • Libtayo for metastatic cutaneous squamous cell carcinoma;
  • Jevtana and Taxotere taxane for cancers
  • Eloxatin for colon cancer;
  • Zaltrap for metastatic colorectal cancer.

SEG: Diabetes

It provides Lantus, Toujeo, Apidra, and Insuman insulins - Amaryl sulfonylurea; Adlyxin/Lyxumia, a GLP-1 receptor agonist - Soliqua 100/33/Suliqua, an insulin glargine and lixisenatide combination to treat diabetes; -Admelog/Insulin lispro insulin

SEG: Generic products

Mainly products for allergy, cough, cold, pain, nutrition, digestion, pediatrics, influenza, meningitis, travel, and endemic vaccines; and adult and adolescent boosters.


Sanofi provides therapeutic solutions worldwide. Sanofi has collaborations with Verily Life Sciences LLC; Happify Health; and GlaxoSmithKline Plc. The company was formerly known as Sanofi-Aventis and changed its name to Sanofi in May 2011. Sanofi was incorporated in 1994 and is headquartered in Paris, France.


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