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Questcor Pays $135 Million to Acquire Rights to a Competitor’s Drug

June 14, 2013 by Leave a Comment

The company, Questcor Pharmaceuticals, has acquired the rights to Synacthen, a drug from Novartis, that is sold in Europe but not in the United States. Synacthen is similar to Questcor’s drug, which is called H.P. Acthar Gel and used to treat various immune-related ailments.

Questcor’s agreement to pay Novartis at least $135 million trumped a bid from a start-up company called Retrophin that had hoped to sell Synacthen in the United States for a few hundred dollars a vial, sharply undercutting Acthar’s price, according to people briefed on Retrophin’s negotiations.

Questcor’s stock shot up 15 percent on Tuesday, the day its deal to acquire Synacthen was announced. “We believe the acquisition removes a key overhang as a potential competitor to Acthar is removed,” Biren Amin, an analyst at Jefferies Company, wrote in a note.

One antitrust lawyer, not involved in the negotiations, predicted the deal would receive “intense scrutiny” by federal antitrust regulators.

“The type of acquisition that raises the most concern under the antitrust law is when a dominant firm acquires a potential rival,” said the lawyer, David A. Balto, a former policy director of the Federal Trade Commission who now calls himself a public interest antitrust lawyer.

But Steve Cartt, the chief operating officer of Questcor, disagreed. He said Questcor did not have to report the transaction to antitrust regulators because Novartis, the licenser, would retain some manufacturing rights to Synacthen.

The Federal Trade Commission is now proposing new rules to end such exemptions from notification.

A spokesman said the trade commission did not comment on whether it was reviewing particular transactions but said it could even when that was not required.

Questcor, based in Anaheim, Calif., has achieved huge success with Acthar, a hormone purified from pig pituitary glands that was selling for only about $40 a vial when the company acquired the drug in 2001.

Questcor began increasing the price. In 2007, it was raised to about $23,000 a vial from $1,650, provoking howls from some doctors and patients, and has continued to raise the price since then.

The company initially said the high price was necessary because the main use of the drug was to treat a very rare condition that causes spasms in babies. But the company has aggressively marketed the drug for more common immune-related disorders like multiple sclerosis and nephrotic syndrome. Sales reached $509 million in 2012, and the price of the company’s stock has soared since 2007.

But insurers are now making sure that Acthar is used only when far cheaper steroids cannot be. The federal government is investigating Questcor’s marketing practices. And many short-sellers have been betting Questcor’s stock will fall.

The most obvious threat to Questcor’s business was the possibility of someone bringing Synacthen to the United States. Synacthen is a synthetic fragment of the hormone in Acthar.

Questcor eliminated that competitor by licensing the exclusive rights to the drug in the United States and various other countries, excluding 13 in Europe, according to a company regulatory filing.

Its initial payment of $60 million to Novartis greatly exceeded the $16 million Retrophin was offering, according to a summary of the tentative deal terms that Retrophin was circulating to investors in an effort to raise money to buy Synacthen. Retrophin, however, was offering Novartis a 20 percent royalty on sales, which is likely to be far higher than what Questcor agreed to pay.

Retrophin, which went public through a reverse merger with a shell company, is based in New York and is run by Martin Shkreli, a former biotechnology hedge fund manager. He declined to comment for this article.

It is not clear if there were other bidders. Novartis declined to comment.

Novartis can revoke the rights if Questcor does not meet deadlines in terms of testing Synacthen in clinical trials and seeking approval to market it in the United States, according to a regulatory filing by Questcor. The deadlines are not being made public.

Mr. Cartt of Questcor said the company would spend millions of dollars testing Synacthen to see if it could help American patients. “That is the essence of discovery and competition, not their elimination,” he said in an e-mail.

In the past Questcor executives have disparaged Synacthen.

“We believe it is unlikely to be a competitor to Acthar,” David Young, Questcor’s chief scientific officer, said in a call with analysts last July. He said it was not a protein produced by the body like Acthar was and added, “Synacthen contains benzyl alcohol, which is toxic to children and can potentially cause gasping syndrome, which can be fatal.”

But in a news release this week, Dr. Young said that Questcor intended to test the drug “not only in conditions different than Acthar but also in conditions where Synacthen would potentially provide a clinical benefit over Acthar.”

Article source: http://www.nytimes.com/2013/06/15/business/questcor-pays-135-million-for-rights-to-competitors-drug.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

U.S. Accuses Novartis of Providing Kickbacks

April 24, 2013 by Leave a Comment

“Using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs,” Preet Bharara, the United States attorney for the Southern District of New York, said in a statement.

The drug involved, Myfortic, is an immune suppressant used to help prevent rejection of transplanted kidneys. It competes with the Roche drug CellCept and, since 2009, with generic versions of CellCept.

The lawsuit, filed in Federal District Court in Manhattan, contended that Novartis promised rebates and discounts to 20 or more pharmacies if they would persuade doctors to switch patients to Myfortic from CellCept, or to keep patients on Myfortic after the cheaper generic versions of CellCept reached the market.

Novartis said in a statement that it disputed the government’s claim and would defend itself.

In filing the suit, the federal government is intervening in a whistle-blower lawsuit that remains under seal, as does the identity of the whistle-blower.

Pharmacies can profit if the amount they are paid for a drug by patients, or their insurers, including Medicare and Medicaid, exceeds what they pay to buy the drug. Getting a discount on the drug from a manufacturer can increase a pharmacy’s profit.

Prosecutors say in their lawsuit that Medicare and Medicaid paid tens of millions of dollars in claims for Myfortic that were “tainted” by the kickbacks.

That does not mean, however, that Medicare and Medicaid lost that much. CellCept and Myfortic cost about the same, according to the lawsuit, so switches from the brand name CellCept to Myfortic would not have appreciably raised federal costs.

Moreover, the suit notes, there are hundreds of pharmacies that prescribe Myfortic and the purported kickback scheme involved only about 20 of them, affecting just “hundreds, possibly thousands” of patients.

The suit says, however, that Novartis chose particularly influential pharmacies which could earn tens or hundreds of thousands of dollars in rebates.

The suit says that pharmacies couched their advice to doctors to use Myfortic as professional recommendations, concealing any mention of the financial inducement the pharmacy was receiving from Novartis.

While the contracts between Novartis and the pharmacies mentioned the discounts, the commitments Novartis received in return were left out of the contracts, the suit says.

In one example, the suit says that Novartis directed more than $650,000 in kickbacks to Bryant’s Pharmacy in Batesville, Ark., which submitted 8,300 Myfortic claims to Medicare Part B alone, receiving more than $3.2 million in reimbursement.

The suit, citing an internal memo by a Novartis account manager, says Bryant’s drove its annual Myfortic sales to more than $1 million a year from $100,000. And when the generic version of CellCept arrived in 2009, the pharmacy argued to doctors that patients doing well on Myfortic should not be switched.

Steve Bryant, owner of Bryant’s Pharmacy, said doctors made the decisions on which drug to use. He said the discounts were given by Novartis to make it affordable for the pharmacy to dispense Myfortic without losing money from inadequate Medicare reimbursement.

None of the pharmacies was named as a defendant in the lawsuit.

Myfortic is one of Novartis’s top 20 drugs, though not a star. Sales in the United States were $239 million in 2012, up 20 percent from 2011. Global sales were $579 million.

Article source: http://www.nytimes.com/2013/04/24/business/us-accuses-novartis-of-providing-kickbacks.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Novartis Profit Rises; Its Chairman Will Step Down

January 23, 2013 by Leave a Comment

The board is proposing that Jörg Reinhardt, the chairman of the German rival Bayer HealthCare, succeed Mr. Vasella. Joseph Jimenez will remain as chief executive.

Novartis said that its profit rose in the fourth quarter but that sales were flat because of price cuts and competition from cheaper drugs. Net income was $2.08 billion, compared with $1.21 billion in the period a year earlier, when it took a $900 million charge from ending its clinical study into wider uses of the hypertension drug Tekturna.

The results were slightly above most analysts’ expectations.

Mr. Jimenez said Novartis had a strong range of new products coming from research and development — including an infant vaccine for meningitis — and predicted net sales to grow after 2013.

Fourth-quarter sales were almost flat at $14.83 billion, compared with $14.78 billion in the period a year earlier, and sales in 2013 are expected to suffer from the expiration of patents on the hypertension drug Diovan.

Novartis said Gilenya, its once-a-day pill against multiple sclerosis, attained what it called “blockbuster status,” with full-year sales of $1.2 billion in 2012.

Novartis expects the Food and Drug Administration to carry out an inspection in the coming months at its plant in Lincoln, Neb., which was shut down at the end of 2011 after officials found numerous problems with quality control. Mr. Jimenez told reporters in a conference call that in the meantime, the company was relying on third-party manufacturers to ensure the continued supply of products like Excedrin across the United States.

Separately, Abbott Laboratories said on Wednesday that its profit fell 35 percent in the fourth quarter on costs from the spinoff of its drug business into the new company AbbVie.

Abbott completed the split on Jan. 1, leaving it with a business model built around generic drugs, medical implants and nutritional formula. AbbVie will market the company’s branded prescription drugs, including the popular anti-inflammatory drug Humira.

In Abbott’s last quarter as a combined unit, the company earned $1.05 billion, or 66 cents a share, compared with $1.62 billion, or $1.02 a share, in the period a year earlier.

Earnings were weighed down by a number of one-time charges, including $265 million in separation costs. Excluding that and other charges, Abbott would have earned $1.51 a share. Revenue increased 4 percent, to $10.84 billion.

Analysts polled by FactSet expected, on average, earnings per share of 70 cents a share on revenue of $10.61 billion.

Finally, Amgen, the maker of the anemia treatments Aranesp and Epogen, posted a 16 percent drop in fourth-quarter profit as higher costs for production, marketing, research and other items offset higher sales for many of its biologic medicines. The results fell short of Wall Street expectations.

Net income was $788 million, or $1.01 a share, compared with $934 million, or $1.08 a share, in the period a year earlier.

Excluding one-time items, net income would have been $1.40 a share, 4 cents less than analysts expected, on average, according to FactSet.

Revenue rose 11 percent, to $4.42 billion.

Sales were led by the immune disorder treatment Enbrel, up 23 percent, to $1.16 billion, and Neulasta and Neupogen for fighting infection in cancer patients. They had a combined $1.31 billion in sales, down 1 percent.

Sales of Aranesp and Epogen fell 9 percent and 1 percent, to a combined $968 million.

Several newer drugs, like Prolia, Xgeva and Sensipar, had double-digit jumps in revenue.

Article source: http://www.nytimes.com/2013/01/24/business/novartis-profit-rises-its-chairman-will-step-down.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Corner Office | Joseph Jimenez: Joseph Jimenez of Novartis, on Finding the Core of a Problem

October 8, 2011 by Leave a Comment

 

Q. What are the most important leadership lessons you’ve learned?

A. One occurred when I was a division president of another company. I was sent in to turn the division around after four years of underperformance.  It was a declining business.  And when I got there, I completely misdiagnosed the problem.  I said: “Look.  We’re missing our forecast every month.  What’s wrong?”  I brought in a consulting firm, and we looked at what was wrong.  And the answer was that we had a bad sales and operations planning process, where salespeople, marketing people and operations people were supposed to come together and plan out the next 18 months and then forecast off of that.  So I said: “O.K.  We’re going to fix this.  We’re going to have the consulting team come in and help us make that a better, more robust process, with more analytics.”

And it turned out it wasn’t at all about analytics.  Because once we did that, and we put that new process in place, we still continued to miss forecasts.  So I thought, “Something’s really wrong here.”  I brought in a behavioral psychologist, and I said: “Look, either I’m misdiagnosing the problem or something’s fundamentally wrong in this organization.  Come and help me figure it out.”  She came in with her team and about four weeks later came back and said: “This isn’t about skills or about process.  You have a fundamental behavioral issue in the organization.  People aren’t telling the truth. So at all levels of the organization, they’ll come together, and they’ll say, ‘Here’s our forecast for the month.’  And they won’t believe it.  They know they’re not going to hit it when they’re saying it.” The thing she taught me — and this sounds obvious — is that behavior is a function of consequence.  We had to change the behavior in the organization so that people felt safe to bring bad news. And I looked in the mirror, and I realized I was part of the problem.  I didn’t want to hear the bad news, either. So I had to change how I behaved, and start to thank people for bringing me bad news.

Q. That doesn’t mean letting them off the hook, though. 

A. Right. It’s more a chance to say: “Hey, thank you for bringing me that news.  Because you know what?  There are nine months left in the year.  Now we have time to do something about it.  Let’s roll up our sleeves, and let’s figure out how we’re going to make it.”  It was a total shift from where we had been previously.  So after that experience, I always ask all of my people, and I always think to myself: “Are we really fixing the root cause of this problem, if there’s any problem?  Or are we fixing the symptoms?”

Q. What else?

A. An important leadership lesson came in my early years.  When I was at Stanford, I was a swimmer, and I was a captain in my senior year. The first thing I learned when I was captain is that you have a lot of people on a team who have different agendas, different objectives. We had to get everyone aligned around a common goal, and the one we set for ourselves was to break into the top five at the N.C.A.A.’s.  In my freshman year, we were No. 20 in the U.S. By our senior year, we ended up third.

Q. And how do you apply that lesson in your current job?

A. When I first became C.E.O. of Novartis, I said: We have 120,000 people. That’s a lot of people to try to align. The first thing I have to do is to have people understand where I’m going to take the company. And it has to be crystal clear. And not only does it have to be crystal clear, but everybody in the organization has to understand it, they have to have line of sight to that goal, and they have to understand how what they’re doing is going to help us move into the future.

Q. How did you learn the importance of that?

A. Throughout my career, all my performance reviews had one thing in common, whether the results were good or the results were bad. They all said that I have the ability to look at very complex situations and make them simple. And I personally believe that if you can’t hold something in your head, then you’re not going to be able to internalize it and act on it. At Novartis, our business is very complicated. But you have to distill the strategy down to its essence for how we’re going to win, and what we’re really going to go after, so that people can hold it in their heads — so that the guy on the plant floor, who’s actually making the medicine, understands the three priorities that we have as a company.

Q. How has your leadership and management style evolved?

Article source: http://feeds.nytimes.com/click.phdo?i=4d1652f110ea2b28e55ebe60114b33c3

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