J.P. Morgan: Suits Take San Francisco

The perennial fat got chewed during the first two days at J.P. Morgan’s annual healthcare conference – buy back stock or raise dividends? – and the usual suspects lurked, but newcomers like Walgreens and not-so-pharma companies like Life Technologies packed the presentation halls and corridors, demonstrating investor and general interest in new ideas, products and services, or “whatever makes money,” in the words of one fund manager.

It has come to be expected that the successive Grand Ballroom PowerPoints – limited to twenty-five minutes apiece and kept tightly on schedule, almost uncannily so – given at J.P. Morgan each year by the largest healthcare companies in the world, don’t sparkle with revelation. The majority of presentations highlight the positives of the preceding year, gloss the negatives or omit them entirely, and project new positives – to be detailed in upcoming earnings reports or analyst meetings – on the years to come.

As everyone knows, the action at J.P. Morgan happens behind closed hotel room doors, or in San Francisco’s near limitless supply of coffee shops, restaurants and taverns. Absent a meeting beyond the bounds of the conference’s relentless schedule, attendees would do well to skip the formal presentations and plant themselves in one of the several breakout rooms, which often feature top management and an open microphone for questions. It was in this context that Vertex – still radiant from last year’s approval of Kalydeco, a drug targeting a small fraction of the cystic fibrosis patient population (and costing almost $300,000 a year) – that president and CEO Jeff Leiden told attendees that payers in mature markets have shown a willingness, so far, to pay a premium for the value Kalydeco provides to patients.

The company recently achieved a favorable reimbursement in England, one of the more frugal and skeptical nations in Europe with respect to drug pricing, which bodes well for reimbursement in Ireland and Wales, said Leiden. In France, the company is currently selling Kalydeco through a patient access program, but Leiden spoke optimistically about that country, as well as Australia, Canada and Germany. New Kalydeco trials for younger patients, aged two to five years, are set to commence this quarter.

There was plenty of talk about genetics, but outside of the success stories mostly in cancer, the enthusiasm of recent years seemed tempered by investors and others who feel that most of the current sequencing activity adds a layer of complexity but often doesn’t lead to actionable insights for drug development, or the treatment of patients in most settings. However, Life Technologies’ CEO, Gregory Lucier, said his goal is to “be the only company in the world that can read, write, and edit DNA,” which is difficult to fully explain in a twenty-five minute presentation (or in a blog post, for that matter). Like Illumina and other device and non-traditional pharma companies, Life Technologies drew capacity crowds, and Lucier described fascinating, almost sci-fi seeming technologies, such as the company’s Pervenio lung cancer molecular test, launched in September, which could dramatically affect survival rates for patients by making it much easier for physicians to determine the best course of therapy for an individual patient based on clear prognostic data in the early stages of the disease.

Although most medicines are still impersonal instead of personalized, catering to patient needs as a way to create value and differentiate products came up again and again in discussions with biopharma executives. Biogen Idec CEO George Scangos talked up his company’s intramuscular injectable form of Avonex, approved last February, describing it as “remarkably popular with patients.” Kermit Crawford, president, pharmacy, health and wellness, at Wallgreens, gave the company’s inaugural PowerPoint at J.P. Morgan, in no less than the Grand Ballroom – the largest of the presentation halls – telling attendees during the breakout session that the retail pharmacy administered five million flu shots in 2012. Flu shots, by the way, are a lot less expensive at Walgreens than they are at most doctors’ offices, said Crawford. The company is building out new capabilities in the form of clinics and home care for patients with chronic diseases, and expanded its global footprint last summer with the purchase of a $6.7 billion, 45% stake in Alliance Boots, a European pharmacy retailer.

Anne Whitaker, Sanofi’s president of pharmaceuticals, North America, said in an interview with PharmExec that supporting patients in areas like diabetes, for example – not just providing medications, but focusing on services that help patients meet their goals – can help to differentiate the company and its products from competitors. “We don’t want to just be the Lantus company,” said Whitaker. Helping diabetic patients successfully control their glucose levels, which means keeping HbA1c levels below 7%, means fewer complications (and less cost to the healthcare system), and since only half of the eight million basil insulin users are hitting those numbers, according to Sanofi’s global R&D president Elias Zerhouni, success in this area would be good for other stakeholders as well. Whitaker alluded to risk-sharing pilot programs Sanofi is conducting with payers that might reward the company with favorable reimbursement based on patient adherence and outcomes.

It should be mentioned that both Abbott and AbbVie gave presentations, neither of which were terribly exciting, although Thomas Freyman, Abbott’s EVP, Finance and CFO, said the nutritionals (one of four core business areas within the new Abbott, the others being established products, diagnostics, and medical devices) market is expected to top $50 billion by 2016, up from $36 billion in 2011, an area in which the company continues to invest; Freyman said Abbott has recently opened the doors to a new nutrition research center in Singapore.

It’s literally impossible to see more than about a seventh of the presentations live on any given day, since they happen concurrently and successively, without breaks in between, and the hallways of the Westin St. Francis get notoriously bottlenecked in between sessions, but the PCSK9 target seemed present in many pipeline overviews, in addition to the use of product combinations to treat larger sub-populations within a given disease or therapeutic area. Outside of the lunchtime keynotes on Monday and Tuesday, given by journalist Bob Woodward and J.P. Morgan head honcho Jamie Dimon, respectively, politics was conspicuously absent from company presentations compared with last year, although Ken Frazier, Merck’s CEO, said at a breakout session that he “told Obama” not to use mandatory drug price cuts to achieve healthcare savings, but to instead create policies that better incentivize the commercialization of innovative new products, which control costs by preventing severe (and expensive) health complications and related hospital visits. Amgen CEO and president Bob Bradway said unspecified provisions of the fiscal cliff bill, signed into law by President Obama on January 3, would generate incremental gains for the company’s Sensipar product, indicated for patients with hyperparathyroidism who are on long-term dialysis for kidney disease, and also to lower calcium levels in people with cancer of the parathyroid gland.

The first two days of the conference offered an increasingly diverse group of companies, including a room and track dedicated exclusively to non-profits, and a lively group of suited attendees who pressed executives for answers in the breakout sessions. More than one CEO expressed relief to find himself in calmer waters, having finally navigated through treacherous patent expiries and R&D failures in recent years, and the mood from the stage was generally upbeat, which might be expected for an audience largely comprised of potential investors. Even so, lots of companies detailed lots of mid and late-stage pipeline candidates, offering new hope for patients and new bets for Wall Street.

Weighing in on the question of buying back stocks versus giving money back to investors in the form of higher dividends, J.P. Morgan’s Dimon said he tended to prefer higher dividends, unless a company can be sure it’s buying back stock at a very low price. But then again, “you know more about healthcare than I do,” Dimon told attendees. Asked what he had learned from J.P. Morgan’s billion dollar trading loss fiasco last spring, Dimon said: “Don’t screw up.”