J.P. Morgan: Pharma's Agenda for 2014

Presenters at the 32^nd annual J.P. Morgan Healthcare Conference talked up value-based pricing, emerging market strategies, complex generics and new technology, from bedside devices and genetic sequencers to first-in-class mechanisms of action. Company executives honed in on their chosen therapeutic areas and made the case for aggressive spending in R&D to bring the next generation of products to market.

Despite J.P. Morgan’s stated policy against photography of any kind, cell phones were once again held aloft to document human gridlock in the winding corridors of San Francisco’s historic Westin St. Francis, where Ansel Adams once photographed the hotel’s Patent Leather Bar (the space is now home to Michael Mina’s Bourbon Steak restaurant).

Hundreds of pharma, biotech, med device/equipment and insurance providers took one of the conferences’ half dozen stages or microphones to discuss last year’s successes and failures, and likely successes in 2014. The conference’s relentless schedule makes it impossible to see everything (and difficult to summarize in total), but the choose-your-own adventure approach to presentations, breakout sessions, keynotes and off-site tête-à-têtes is enough to satisfy even the most rabid analyst, information junkie or business development proselytizer.

As noted previously, company presentations tend to be pro forma (despite several notable exceptions this year), with the more revelatory tidbits typically reserved for smaller audiences squeezed into breakout rooms, or personal meetings commenced at nearby hotels, coffee shops and bars. For reporters, J.P. Morgan can be a gift that keeps on giving; stay tuned for in-depth company and executive profiles. For now, here are some of the top-line issues presented and discussed during this year’s conference:

Cost-cutting programs. Novartis CEO Joe Jimenez said he would focus on creating synergies between the company’s three core business areas: Alcon, Sandoz and pharmaceuticals, where 90 percent of the company’s value is held (personnel in the vaccines/diagnostics, animal health and OTC divisions, you may be on notice). Lamberto Andreotti, CEO at Bristol-Myers Squibb, gave an uninspired presentation in the grand ballroom, retelling the company’s transition from pharma to biopharma, beginning in 2008. In December BMS sold its half of a joint venture in diabetes to AstraZeneca, for over $4 billion, in an effort to focus on core business areas, like oncology.

Teva’s acting president and CEO, Eyal Desheh, said the company would announce headcount reductions and the elimination of “low-value activities” in 2014, even as he downplayed potential Copaxone copycats, dubbing them “purported generics.” In an interview with PharmExec, Momenta Pharmaceuticals CEO Craig Wheeler begged to differ – more on that in a separate article. Teva recently announced that Erez Vigodman would serve as the company’s next CEO, and analysts wanted to know whether Vigodman would remain on the board of directors, in addition to his role as CEO (answer: he will). The question was pregnant, given former CEO Jeremy Levin’s conflict with Teva board chairman Phillip Frost about how best to restructure the company. That conflict resulted in Levin’s abrupt resignation last October, after just 18 months on the job. Desheh spoke highly of incoming CEO Vigodman, calling him a strong leader with the capability to penetrate emerging markets and turn companies around, but also referred to him as “the devil you know,” setting off titters among the audience.

GlaxoSmithKline CFO Simon Dingemans kicked his presentation off with a word about GSK’s decision to offload its nutritional drink products – Lucozade and Ribena – and the company’s plans to hunker down around three core franchises: respiratory, oncology and HIV. Dingemans said GSK expects to continue making divestments in 2014, and hopes to realize tax savings resulting from the relocation of “lots of IP” to the UK Patent Box.

On the issue of tax savings, Leonard Schleifer, CEO at Regeneron Pharmaceuticals, said his company would break ground this year on a manufacturing plant in Limerick, Ireland, to better serve European patients but also to improve tax rates.

Value-based pricing. Even though Roche CFO Alan Hippe congratulated the US market for its willingness to support innovation – “If there is an innovative drug out there, it goes to the US market first, 12 months ahead of Europe” – and even though Roche gets “better pricing compared with our peers, and fewer price cuts,” Hippe still cited pricing and access as a key issue and challenge for the company in 2014. Roche is exploring episode of care-based pricing, special pricing for combination drugs and also indication-based pricing, although Hippe said more “patient-based information” is needed to make value-based pricing schemes work.

Medtronic CEO Omar Ishrak, after expressing his disappointment about missed efficacy endpoints on the company’s experimental Symplicity renal denervation system for resistant hypertension, said the company will nevertheless “lead the transition” to value-based pricing. Medronic has a “willingness to enter into risk-sharing models,” said Ishrak, citing the acquisition of Cardiocom, a disease management and patient monitoring firm. Medronic’s US president, Mike Genau, told the Wall Street Journal last August that the Cardiocom purchase would help to show hospital customers “how you take costs out of the system.”

Hemophilia. As as therapeutic area of interest for R&D, hemophilia seems to be having a moment, which is interesting given the relatively tiny patient population. Many companies talked up their product candidates targeting hemophilia indications. Bob Hombach, corporate VP and CFOP at Baxter, a current leader in the market (along with Bayer), said the company is “making inroads” in China (with Advate) and Brazil (with Recombinate factor VIII). In December Baxter received FDA approval for Feiba, a routine prophylaxis for hemophilia patients that have developed an immune response to specific therapies. Hombach said Feiba will benefit from new guidelines recommending the use of prophylaxis for a lifetime, for some patients.

Alnylam made news at the conference on Monday with the announcement of a $700 million share purchase (at $80 a share), courtesy of Genzyme. The deal gives Genzyme (a division of Sanofi) an opportunity to co-develop and co-promote ALN-AS1, a preclinical RNAi candidate for hemophilia, as well as co-promote duties on ALN-TTR02, a phase 3 rare disease product.

Biogen Idec doesn’t have a hemophilia drug on the market yet, but CEO George Scangos said his company’s goal is to become the category leader in hemophilia. BI’s Alprolix and Eloctate are both in late stages of development, and could be approved this year, said Scangos.

Personalized medicine. Illumina bucked the trend at J.P. Morgan by announcing big company news during its scheduled presentation. Held in the upstairs and smallish California West room, there was hardly space to scribble notes as CEO Jay Flatley announced a host of new product launches, including BaseSpace Onsight, a grounded version of the company’s cloud-based service BaseSpace, for those potential clients who remain paranoid about security in the cloud.

More importantly, Flatley announced two new sequencers, the NextSeq and the HiSeqX. Both represent an improvement on current sequencing speeds, but the HiSeqX can scan a genome six times faster, said Flatley. The machine can allegedly sequence five genomes per day, and turn out 1.8 terabytes in three days. If you’d like to buy a HiSeqX, you’ll need to buy 10 of them, for a cool $10 million. After that, Flatley will sell you individual machines one at a time, for $1 million apiece.

The biggest news from Illumina was the launch of “the first real $1,000 genome.” Flatley said the total cost of this service rings in at $989 to $999 dollars, plus institutional overhead costs, and any informatics or analytics you may want to run on all that data.

Richard Pops, CEO at Alkermes, a CNS company, said schizophrenics need a more personalized course of therapy, since many have substance abuse issues, which can exclude them from clinical trials. “Substance abuse is part of the disease,” said Pops. Alkermes is testing a combination product called ALKS 3831 to address schizophrenic patients with alcohol dependency, or with weight gain, in a bid to outperform olanzapine (Zyprexa) alone. The company is also planning to file an IND and initiate clinical trials on ALKS 7106, a pain drug. What’s novel about that? “We are unable to kill animals with this product from respiratory depression,” said Pops. Popping more pills – the most common form of pain drug abuse – won’t get you any higher with ALKS 7106, said Pops.

America. During a keynote address over lunch on Wednesday, J.P. Morgan’s CEO Jamie Dimon seemed as optimistic about American ingenuity and labor as he always is, if only Congress would get its act together. “America is safe when Congress is in recess,” he said. On tax policy, Dimon said the GAAP tax rate in the US is between 30 and 25 percent, which is 10 points above the OECD average. “That pushes things overseas,” he said. Dimon added that he would support eliminating all taxes, except for a 40 percent tax on individual income, including capital gains.

At one point, a member of the audience stood up and called Dimon’s optimism in America unfounded, on the grounds of poor educational performance, environmental degradation, and the “financialization” of everything. Dimon told the commentator that “most of what you said is untrue,” before launching into a defense of the much-maligned Millennial generation. “People bad mouth the Millennials, call them lazy and sloppy…no,” said Dimon. “My generation had long hair and smoked pot, and we’re doing okay.” To solve problems in early childhood education, Dimon suggested that America “emulate Singapore.”