August 10, 2023

The need-to-know this morning

Novo Nordisk reported second-quarter earnings highlighted by better-than-expected sales of its obesity drug Wegovy, although total revenue fell short of market consensus. The company raised revenue guidance for the remainder of the year, even as the availability of Wegovy remains restricted due to manufacturing constraints. Read more of STAT's coverage here.
Novo also announced the acquisition of Canadian biotech Inversago Pharma in a deal worth up to $1 billion. The company's lead drug candidate showed promising weight loss results in an early-stage trial, Novo said.
The FDA approved a new treatment for advanced multiple myeloma made by Johnson & Johnson. The drug will be sold under the brand name Talvey.

Sequencing

Things can get worse for Illumina

Illumina, the genomics hegemon struggling to grow its business, has endured a caustic proxy fight, a C-suite shakeup, and the transatlantic ire of antitrust regulators. And the worst apparently isn't over.

As STAT's Jonathan Wosen reports, the company said yesterday that its outlook for 2023 is even dimmer than before. Illumina now expects its revenue to grow just 1% for the year, walking back its earlier projection of 7% to 10%. The news sent Illumina's share price down about 7%, and the company has lost a fifth of its value in the past four months.

Meanwhile, Illumina is in the middle of a long-awaited rollout of its latest genomic sequencing technology, a product whose success is integral to the company's future. Illumina is yet to name a successor to CEO Francis deSouza, who resigned in June. As of this week, the company's heads of technology and medicine are leaving, too.

Read more.

M&A

Regeneron joins the ranks of discount shoppers

For the first three decades of its existence, Regeneron Pharmaceuticals was a conscientious objector to mergers and acquisitions. But after buying two companies in as many years, the maker of Eylea is beginning to look like a bargain hunter.

Yesterday, Regeneron agreed to pay about $100 million for Decibel Therapeutics, a company developing gene therapies for hearing loss. The price, relative to Regeneron's $87 billion valuation, makes the deal read a bit like Croesus picking up some new sandals. But this is only the second acquisition in Regeneron's 35-year history, after its 2022 deal to acquire Checkmate Pharmaceuticals for $250 million.

Both deals were for fairly distressed assets. Decibel has lost more than 80% of its value since 2021, and Regeneron's offer price for Checkmate was 30% below where the company went public just two years before. There's no shortage of biotech companies trading well below their 2021 peaks, including more than 100 with valuations below their cash reserves. If Regeneron wants to make a habit of shopping for discounts, it'll find plenty of inventory.

Policy

Genentech has a weighty decision to make

Drug companies, in their many protestations against a law letting Medicare negotiate certain drug prices, often cite hypothetical situations in which the process could be harmful to patients. Genentech CEO Alexander Hardy said his company is facing a present-day dilemma that puts profits at odds with patient health.

In an interview with STAT's Rachel Cohrs, Hardy said Genentech has a cancer drug with the potential to treat multiple tumor types. Before the Inflation Reduction Act, the playbook would be to start by studying it in ovarian cancer, a relatively small indication that could lead to a fast approval, and then develop the medicine for the larger, more lucrative market of prostate cancer, which will take longer. But under the IRA, the nine-year clock on potential negotiation starts when a drug wins its first approval, meaning Genentech's financial incentive would be to hold off on ovarian cancer and go straight for prostate cancer, maximizing its earnings potential at the expense of patients waiting for new treatments.

The fact that Hardy is saying this in public suggests Genentech will not be doing that. The marginal revenue benefit it would bring probably wouldn't be worth the reputational problem of being the company that decided the needs of cancer patients were less important than charging as high a price for as long as possible. But the concrete example might help convince some lawmakers to get behind the industry's efforts to amend the IRA, an effort that hasn't yet picked up steam.

Markets

Maybe it only takes one to Tango

Tango Therapeutics was silent yesterday and yet its stock price doubled. For that, it can thank competitor Mirati Therapeutics, which disclosed early but encouraging clinical activity for an experimental drug that blocks a cancer-causing enzyme called PRMT5. Tango is developing two cancer drugs that also target PRMT5. Dance card, punched.

On Thursday, Tango cashed in, raising $80 million in a follow-on stock offering.

The bystander effect can also work in reverse. Celldex Therapeutics said nothing new or surprising Tuesday night about its lead program developing a treatment for chronic hives. But yesterday, Celldex fell 6% after Novartis reported positive results from twin Phase 3 studies for its own chronic hive treatment.

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