February 6, 2024

The need-to-know this morning

Eli Lilly reported fourth-quarter earnings and revenue that topped Street consensus. Sales of Mounjaro, Lilly's GLP-1 medicine for diabetes, totaled $2.2 billion versus $1.7 billion consensus. The same drug, recently approved as Zepbound for obesity, had sales of $176 million. For 2024, Lilly is forecasting revenue in the range of $40.4-41.6 billion, higher than current Street consensus.
Lilly also reported results from a Phase 2 study of tirzepatide (Mounjaro/Zepbound) in the fatty liver disease known as MASH, showing 74% MASH reversal without worsening of fibrosis compared to 13% for placebo — statistically significant for the study's primary goal. Lilly said tirzepatide also showed a "clinically meaningful" reduction in liver fibrosis, a key secondary endpoint, but missed statistical significance.

Financials

Is selling stuff to biotech a good business?

Consider yesterday's big deal, in which Novo Holdings paid about $17 billion for the pharma contractor Catalent and then flipped three of the company's plants to Novo Nordisk, in which it owns a controlling stake.

On the one hand, the deal suggests there's money to be made in selling manufacturing services to drug companies, or else Novo Holdings wouldn't have bought Catalent in its entirety. On the other hand, it suggests drug companies might be better served by doing all their manufacturing in-house, or else Novo Nordisk wouldn't have bought those plants for its exclusive use.

As STAT's Matthew Herper writes, the seemingly contradictory transaction is a neat snapshot of how the drug industry works in 2024. For all their recent issues, contract manufacturers are still valuable for most drug companies, whose changing needs make it more prudent to outsource certain services rather than pay to maintain them internally. But Novo Nordisk isn't most drug companies. The Danish firm can't seem to make enough Ozempic and Wegovy to satisfy demand, and thus paying billions of dollars to own the means of production makes economic sense.

Read more.

M&A

Novartis, MorphoSys, and a multibillion-dollar wager

Novartis agreed to pay about nearly $3 billion for German drugmaker MorphoSys, a deal that fits with the Swiss company's oft-repeated desire to buy things that cost less than $5 billion but still represents a sizable gamble.

That's because MorphoSys' most discussed drug, a blood cancer therapy called pelabresib, is hardly a sure thing. Last year, the drug met its primary endpoint in a myelofibrosis study, reducing patients' spleen volume relative to placebo. But MorphoSys' treatment had no significant benefits on a measure of patients' symptoms, something the company had previously said would be required to win regulatory approval.

MorphoSys is betting the FDA will look favorably on pelabresib despite its mixed clinical data. Novartis, by agreeing to acquire it, is staking billions of dollars on that notion. What's curious is why Novartis, which has plenty of cash to spend, would act hastily instead of waiting until regulators weigh in and provide a clearer picture of pelabresib's future.

Biotech

Vertex still knows how to make CF drugs

After all the debate over Vertex Pharmaceuticals' planned future in treating pain, the company came through with an expected but no less appreciated reminder of what it does best.

Vertex's once-daily cystic fibrosis therapy succeeded in a pair of Phase 3 studies that compared it to Trikafta, a blockbuster treatment that requires two doses per day. A third study found the drug was safe and effective for patients as young as 6.

The drug's success sets the stage for regulatory filings later this year. If approved, the once-a-day treatment would extend the company's dominance in the market for cystic fibrosis treatments and meaningfully reduce its royalty obligations. The news sent Vertex's share price up about 2% after hours yesterday.

Antitrust

Something's knotty in Denmark

About once a year, something happens in biotech that leads everyone to seemingly learn anew that Novo Nordisk has a weird ownership structure. Yesterday, when Novo Holdings bought something and sold part of it Novo Nordisk, was a prime example.

Here's how it works: The Novo Nordisk Foundation, a charitable organization worth more than $100 billion, owns 100% of Novo Holdings, a holding company that retains minority stakes and majority voting power in the drugmaker Novo Nordisk and the industrial biotech firm Novonesis. This would all be less confusing if all the Danes involved didn't insist on naming everything "Novo," but here we are.

What's novel is a concern about conflict of interest. Once yesterday's deal closes, Novo Holdings will control what's left of Catalent, a company that sells services to other drug companies, some of which compete with Novo Nordisk. As biotech investor Brad Loncar wrote, "if you are a customer of Catalent, do you want its new owner to be an investment firm who naturally has the best interest of another drug developer top of mind?"

The deal, expected to close later this year, could make the FTC the next party to learn more about the many Novos of Denmark.

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