Novartis: Operation Transformation
Lichtstrasse 35
4056 Basel, Switzerland
Telephone: +41 61 324 11 11
Website: novartis.com
Best-Selling Products
| Product | 2014 Sales | 2013 Sales |
|---|---|---|
| Gleevec/Glivec | $4,746 | $4,693 |
| Diovan, Diovan HCT | $2,345 | $3,524 |
| Lucentis | $2,441 | $2,383 |
| Gilenya | $2,477 | $1,934 |
| Sandostatin | $1,650 | $1,589 |
| Exforge | $1,396 | $1,456 |
| Afinitor/Votubia | $1,575 | $1,309 |
| Tasigna | $1,529 | $1,266 |
| Galvus, Eucreas | $1,224 | $1,200 |
| Exelon, Exelon Patch | $1,009 | $1,032 |
| Exjade | $926 | $893 |
| Neoral, Sandimmun | $684 | $750 |
| Voltaren Group (excluding OTC) | $632 | $675 |
| Myfortic | $543 | $637 |
| Xolair | $777 | $613 |
All sales are in millions of dollars.
Financial Performance
| 2014 | 2013 | |
|---|---|---|
| Revenue | $57,996 | $57,920 |
| Net income | $10,280 | $9,292 |
| EPS | $4.13 | $3.70 |
| R&D expense | $9,943 | $9,852 |
| 1H15 | 1H14 | |
|---|---|---|
| Revenue | $24,655 | $24,655 |
| Net income | $14,843 | $5,553 |
| EPS | $6.06 | $2.22 |
| R&D expense | $4,273 | $4,388 |
All sales are in millions of dollars except EPS.
Novartis laid out five clear priorities for 2015: deliver strong financial results, strengthen innovation, complete its portfolio transformation, capture cross-divisional synergies, and build a high-performing organization. In each of these areas, Novartis made solid advancement during the first half of 2015.
The 2015 priorities stem in part from what management calls a far-reaching transformation process that Novartis initiated during 2014. Leadership says these operational and structural changes have several objectives: to strengthen sales and profit growth, to drive the company’s ability to innovate, and to successfully position Novartis for the long term in the face of increasingly dynamic change in the global healthcare industry.
Novartis undertook significant changes to its business portfolio with the goal of being a worldwide leader in three core areas: innovative pharmaceuticals, eye care, and generic medicines. The company has divested or spun off operations that lack the potential to be worldwide leaders, including businesses in vaccines and over-the-counter products.
During 2014, Novartis announced agreements with GlaxoSmithKline plc, Eli Lilly and Co., and CSL Ltd. on a set of transactions intended to transform the Group’s portfolio of businesses.
The acquisition of GSK’s oncology products for an aggregate cash consideration of $16 billion bolsters Novartis’ high-priority oncology business, solidifying its position as the world’s No. 2 company in cancer treatments. Novartis Oncology now manages a portfolio of 22 oncology and hematology medicines to treat 25-plus conditions globally. Newly acquired therapies in melanoma, renal cell carcinoma and hematology complement Novartis Oncology’s existing group of practice-changing drugs to create a large portfolio of medicines in oncology and hematology targeting important biological disease pathways.
Novartis sold its Vaccines Division – excluding the influenza business – to GlaxoSmithKline for up to $7.1 billion plus royalties, creating the No. 1 vaccines business globally. In turn, Novartis sold its influenza vaccines business to CSL in a separate transaction. Also, Novartis and GlaxoSmithKline merged their over-the-counter businesses into a joint venture that is one of the world’s largest consumer healthcare companies. Novartis owns 36.5 percent of the joint venture.
Following the announced completion on March 2, 2015, of the transactions with GlaxoSmithKline, Novartis says the integration has advanced on track. As of late July 2015, the transfer of marketing authorizations was complete for 75 percent of sales, and field forces were operational in more than 50 markets.
The divestment of the Novartis influenza business to CSL was the last step in the portfolio transformation. The divestiture of the influenza vaccine unit to CSL became effective July 31, 2015. The acquisition, which included Novartis’ influenza vaccines development pipeline, was completed for $275 million.
Novartis completed the sale of its Animal Health business on Jan. 1, 2015, to Lilly for $5.4 billion, creating the world’s No. 2 company in that sector. The series of transactions has reduced the amount of Novartis divisions from six to three: pharmaceuticals, eye care, and generics.
In parallel, Novartis is expanding research efforts in age-related and chronic diseases, which are growing in significance as the population ages. The company is consolidating its internal services into one organization to strengthen Group-wide collaboration.
With a research pipeline of 200-plus projects in clinical studies and a broad portfolio of pharmaceuticals, eye care products and generics, management says Novartis is well-positioned for the long term. As of June 2015, Pharmaceuticals had an industry-leading pipeline with 143 active programs, including 74 new molecular entities, more than 500 ongoing trials and 300-plus trials planned to start through year-end 2016.
According to leadership, the company can be a good partner for healthcare systems in mature and emerging markets, offering therapies that improve outcomes in a cost-effective manner. Novartis is also working to advance access to medicine in developing markets and intensify research in the field of neglected diseases so that patients around the globe can live longer and healthier.
A first-of-its-kind portfolio approach in the healthcare industry was announced by Novartis during September 2015. Novartis Access is intended to increase availability and affordability of 15 medicines against cardiovascular diseases, diabetes, respiratory illnesses and breast cancer. The portfolio will be offered to governments and non-governmental organizations in low- and low-middle-income countries for $1 per treatment a month. About 28 million people die from chronic diseases in low- and middle-income countries every year, representing 75 percent of such deaths worldwide.
Company performance
Some of Novartis’ top-selling medicines have started to face considerable competition because of the expiration of patent protection. The patent on imatinib – the active ingredient in the company’s No. 1 seller Gleevec/Glivec — expired during 2014 in Japan for its primary indications and during July 2015 in the United States. The imatinib patent is set to expire during 2016 in the major European countries. Other patents claiming innovative features of Gleevec/Glivec have been challenged in the United States, and a settlement with Sun Pharmaceutical Industries Ltd. enables that manufacturer to enter the U.S. marketplace on Feb. 1, 2016. Generic forms of Gleevec/Glivec have already been introduced in various countries worldwide.
The patent on valsartan, the active ingredient in the antihypertensive agents Diovan and Diovan HCT/Co-Diovan — which had long been Novartis’ top-selling medicine franchise – has expired in the EU, the United States and Japan, with generic rivals having launched there. Patent protection for Co-Diovan is expected to expire in Japan during 2016, including patent-term extensions.
Despite this generic competition to Novartis’ two best-selling medicine families from 2013, Group net sales rose 1 percent in U.S. dollars and 3 percent in constant currencies (cc) to $58 billion during 2014. Growth Products accounted for $18.6 billion or 32 percent of Group net sales, increasing 18 percent in U.S. dollars compared to 2013. Loss of exclusivity, including for Diovan, affected sales by $2.4 billion.
According to the company’s half-year 2015 report, Growth Products include Gilenya, Lucentis, Afinitor, Tasigna, Xolair, the COPD portfolio, the Tafinlar/Mekinist combination and Jakavi. Novartis says Growth Products are an indicator of the rejuvenation of the portfolio, and comprise medicines launched in a key market (EU, United States, Japan) in 2010 or later, or products with exclusivity in key markets until at least 2019 (except Sandoz, which includes only products introduced in the previous 24 months). Novartis says they include the acquisition effect of GlaxoSmithKline’s oncology assets.
For Novartis, 2014 Group net income of $10.28 billion increased 12 percent (+19 percent cc), growing ahead of operating income mainly due to higher income from associated companies. That included a pre-tax gain of $800 million from the sale of the shares of Idenix Pharmaceuticals Inc. to Merck & Co. as agreed to in June 2014, as well as a pre-tax gain of $400 million from the divestment of the shareholding in LTS Lohmann Therapie-Systeme AG, partly offset by an increase in tax expense.
Earnings per share advanced 14 percent (+20 percent cc) to $4.21, growing ahead of net income because of lower average outstanding shares and lower minority interest. Group core net income of $12.8 billion improved 3 percent (+8 percent cc), in line with core operating income. Core earnings per share came to $5.23 (+4 percent, +10 percent cc), growing ahead of core net income due to lower average outstanding shares and lower minority interest.
Comparing results for 2014 versus 2013 including the blood transfusion diagnostics unit, Group total net sales remained stable in U.S. dollars (0 percent, +2 percent cc), operating income decreased 2 percent (+5 percent cc), net income improved 11 percent (+17 percent cc) and EPS rose slightly ahead of net income at 12 percent (+18 percent cc) due to lower average outstanding shares and lower minority interest.
The Pharmaceuticals business produced 2014 net sales of $31.79 billion (-1 percent, +1 percent cc), driven by volume growth (+7 percentage points) and pricing (+1 percentage points), offset by the impact of generic competition (-7 percentage points). Growth Products continued to propel performance and rejuvenate the portfolio, accounting for 13.7 billion of division net sales, an increase of 17 percent (cc) compared to 2013.
First-half 2015 net sales for the entirety of Novartis totaled $24.66 billion (-6 percent, +4 percent cc). Growth Products contributed $8.1 billion or 33 percent of net sales, an increase of 19 percent versus the first six months of 2014.
Beginning on March 2, 2015, which was the date of the completed GlaxoSmithKline transactions, continuing operations additionally includes the results from the new oncology assets acquired from GSK and the 36.5 percent interest in the GSK consumer healthcare joint venture. For discontinued operations, operational results include the results from the influenza Vaccines business, the non-influenza Vaccines business and OTC until March 2, 2015. Operational results from the Animal Health business, which was divested on Jan. 1, 2015, include just the divestment gain. The 2014 figures included the results of all divested units during the second quarter and first half.
Net income from continuing operations totaled $4.16 billion (-20 percent, -5 percent cc) for January-June 2015, decreasing more than operating income from continuing operations mainly because of lower income from associated companies. First-half 2015 EPS from continuing operations was reported at $1.72 (-18 percent, -3 percent cc), declining less than net income from continuing operations due to the lower amount of average outstanding shares.
Core net income from continuing operations in the first six months of 2015 was reported at $6.27 billion (-6 percent, +7 percent cc), broadly in line with core operating income from continuing operations. Core earnings per share from continuing operations came to $2.60 (-4 percent, +9 percent cc), growing ahead of core net income from continuing operations because of the lower amount of average outstanding shares.
Pharmaceuticals generated first-half 2015 net sales of $15 billion (-6 percent, +4 percent cc), driven by volume growth (+12 percentage points), which more than offset the impact of generic competition (-8 percentage points). Novartis says pricing impact was negligible.
Based on the half-year results, Group net sales for full-year 2015 are expected to increase by mid-single digits (cc) after absorbing the impact of generic competition, which is expected to be the same as 2014 ($2.4 billion). Group core operating income is projected to increase ahead of sales at a high-single digit rate (cc) for full-year 2015. These comparisons are versus 2014 continuing operations. From a divisional perspective, Pharmaceuticals were confirmed at mid-single digit sales growth (cc); Alcon was revised downward to low-single digit sales growth (cc); and Sandoz was upgraded to high-single digit sales growth (cc). If mid-July exchange rates prevail for the remainder of the year, the currency impact for full-year 2015 would be negative 9 percent on sales and negative 13-14 percent on core operating income.
Product/category review
Novartis’ portfolio of pharmaceuticals, eye care products and generic medicines are available in more than 180 countries around the globe. The company’s products reached over 1 billion people worldwide during 2014.
Novartis’ Bcr-Abl franchise, consisting of Tasigna and Gleevec/Glivec, generated 2014 sales of $6.28 billion, up 1 percent in U.S. dollars and 7 percent cc versus the prior year. Gleevec/Glivec sales reached $4.75 billion, increasing 2 percent cc, and Tasigna totaled $1.53 billion, up 24 percent cc versus its 2013 performance. For the first six months of 2015, Bcr-Abl franchise sales improved 9 percent cc to $3.04 billion, with Gleevec/Glivec up 6 percent to $2.25 billion and Tasigna sales increasing 21 percent to $784 million. Gleevec/Glivec experienced solid growth in the second quarter of 2015, fueled by the drug’s U.S. performance. Tasigna also sold well in the U.S. market with double-digit growth. Novartis says Tasigna is a more effective, targeted therapy than Gleevec/Glivec for adult patients newly diagnosed with Philadelphia chromosome-positive (Ph+) chronic myeloid leukemia (CML) in the chronic phase. Tasigna is additionally approved for treating adult patients with Ph+CML in the chronic or accelerated phase who are resistant or intolerant to at least one prior therapy, including Gleevec/Glivec.
Other blockbuster anticancer agents for Novartis include Afinitor/Votubia and Sandostatin. Sales for Afinitor/Votubia totaled $1.58 billion (up 22 percent cc) during 2014 and $811 million (+19 percent cc) for the first two quarters of 2015. Sandostatin sales amounted to $1.65 billion (+ 6 percent cc) for 2014 and $798 million (+8 percent cc) during January-June 2015.
Afinitor is an oral inhibitor of the mTOR pathway. The drug is approved in combination with exemestane for treating patients with HR+/HER2- advanced breast cancer after failure with a non-steroidal aromatase inhibitor, for advanced renal cell carcinoma following vascular endothelial growth factor-targeted therapy and for treating advanced pancreatic NET. Afinitor is available for subependymal giant cell astrocytoma (SEGA) and renal angiomyolipoma associated with tuberous sclerosis complex.
Everolimus, the main chemical in Afinitor/Votubia, is marketed under the trade names Zortress/Certican for use in other non-oncology indications and is exclusively licensed to Abbott and sublicensed to Boston Scientific for use in drug-eluting stents. Zortess/Certican sales for Novartis totaled $327 million (+36 percent cc) in 2014 and $161 million (+19 percent cc) in 1H 2015.
Zortress/Certican is marketed in 90-plus countries to prevent organ rejection in adult heart and kidney transplant patients. The product is additionally available for liver transplant patients in more than 70 countries, including the EU and United States. The drug has been filed for use in pediatric kidney transplant patients in the EU.
The Sandostatin franchise during 2014 and first-half 2015 continued to benefit from the growing use of Sandostatin LAR (long-acting release) in key markets. The somatostatin analog Sandostatin is a used to treat patients with acromegaly and neuroendocrine tumors (NET). In NET, the drug is used for patients with symptoms of carcinoid syndrome as well as those with advanced NET of the midgut or unknown primary tumor location (approved in 52 countries). An enhanced version of
Sandostatin LAR, which includes a diluent, safety needle and vial adapter, has been approved in 60-plus countries, with other filings under way. According to Novartis, Sandostatin and Sandostatin LAR are the most studied and prescribed somatostatin analogs worldwide.
The oncology portfolio for Novartis also includes the Growth Product Jakavi. Sales for the drug improved from $163 million during 2013 to $279 for the following calendar term. The sales upswing continued during January-June 2015, rising 76 percent cc to $188 million.
Jakavi is an oral inhibitor of the JAK 1 and JAK 2 tyrosine kinases. Jakavi is the first JAK inhibitor indicated for treating disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis (also known as chronic idiopathic myelofibrosis), post-polycythemia vera myelofibrosis or post-essential thrombocythemia myelofibrosis. The medicine is marketed in 80-plus countries, including EU member states, Japan and Canada.
The European Commission during March 2015 approved Jakavi for treating adult patients with polycythemia vera who are resistant to or intolerant of hydroxyurea. Jakavi (ruxolitinib) is the first targeted treatment approved by the European Commission for such patients. Regulatory filings have additionally been submitted in Switzerland, Japan and other countries for Jakavi in the PV indication. Novartis licensed ruxolitinib from Incyte Corp. for non-U.S. development and commercialization. Ruxolitinib is marketed in the United States by Incyte under the trade name Jakafi.
Another oncology Growth Product is the Tafinlar/Mekinist combination, which according to Novartis is growing dynamically and generated first-half 2015 sales of $131 million. Tafinlar/Mekinist is the first approved combination therapy for treating patients with BRAF V600 mutation positive unresectable or metastatic melanoma, as detected by a validated test, in the United States, European Union, Canada and other markets. The combination gained U.S. marketing clearance via the accelerated approval process and is contingent upon further FDA verification of clinical benefit from two recently completed Phase III confirmatory studies. Novartis announced that the European Commission granted approval during the beginning of September 2015.
Tafinlar targets the serine/threonine kinase BRAF in the RAS/RAF/MEK/ERK pathway and Mekinist targets the threonine/tyrosine kinases MEK1 and MEK2 in the MAP kinase pathway, leading to dual blockade of this pathway, which is the main escape mechanism for resistance. Tafinlar/Mekinist is the first combination of BRAF/MEK inhibitors to show a statistically significant overall survival benefit for this patient population in two Phase III trials. The combination of Tafinlar and Mekinist has demonstrated more than a six-month survival improvement versus BRAF monotherapies, the current standard of care in this subgroup of BRAF V600 mutation positive unresectable or metastatic melanoma patients.
Tafinlar (dabrafenib) and Mekinist (trametinib) are additionally marketed as single agents for treating patients with unresectable or metastatic melanoma in more than 45 and 30 countries respectively. Tafinlar has Breakthrough Therapy designation in the United States for treating non-small cell lung cancer (NSCLC) patients with BRAF V600E mutations who have received at least one prior line of platinum-containing chemotherapy. During July 2015, the combination therapy additionally gained Breakthrough Therapy designation from FDA for NSCLC patients with BRAF V600E mutations.
Neuroscience sales for Novartis totaled $4.51 billion (+13 percent cc) during 2014 and $2 billion (+11 percent cc) in the first six months of 2015. Leading the segment’s sales charge is the oral multiple sclerosis therapy Gilenya, which is Novartis’ second best seller. Global sales improved from $1.93 billion in 2013 to $2.48 billion for 2014. Gilenya’s sales during first-half 2015 reached $1.34 billion, increasing 26 percent cc compared to the first six months of 2014.
Gilenya is the first once-per-day oral therapy for treating relapsing forms of multiple sclerosis. The medicine continues to experience volume growth via new patient initiations (including new patient starts, i.e. naïve patients, restarts and switches) in the United States and internationally. Licensed from Mitsubishi Tanabe Pharma, the product is marketed in more than 80 countries. As of May 2015, Gilenya had been used to treat an estimated 125,000 patients in clinical studies and the post-marketing setting. The total patient exposure is more than 240,000 patient years.
The Exelon franchise was able to maintain blockbuster status during 2014, with sales coming in at $1.01 billion (down 1 percent cc). Sales for the first six months of 2015 were down 6 percent cc to $441 million compared to the drug’s January-June 2014 performance. Sales are on the decline because of generic competition for Exelon Patch in the EU, which offset growth for the patch in the United States and other countries.
Exelon Patch is marketed for treating mild-to-moderate Alzheimer’s disease (AD) dementia in over 90 countries, including more than 20 countries where the drug is additionally approved for Parkinson’s disease dementia. Exelon Patch is indicated for treating patients with severe AD in 14 countries, including the United States. In the United States, no ANDA filer has gained U.S. marketing clearance for a generic version of Exelon Patch as of July 2015.
Novartis’ Ophthalmics franchise generated 2014 sales of $2.5 billion, representing increases of 2 percent in U.S. dollars and 5 percent in constant currencies versus the prior calendar year. Most of the 2014 sales came from Growth Product Lucentis, which generated $2.44 billion (also +2 percent, +5 percent cc) during that period. In first-half 2015, Lucentis generated $1.08 billion (-13 percent, +1 percent cc compared to the first six months of the previous year). Overall sales for the segment, now classified by Novartis as Retina, were reported at $1.1 billion during the first six months of 2015 compared to $1.27 billion for the one-year-earlier period.
According to Novartis, the wet AMD indication for Lucentis is stabilizing and new indications — diabetic macular edema (DME), macular edema secondary to central and branch retinal vein occlusion (CRVO and BRVO), and choroidal neovascularization secondary to pathologic myopia — are experiencing slower growth due to new competitors entering the field. The Lucentis prefilled syringe continued to perform solidly during second-quarter 2015 after a successful market introduction in 22 countries.
The anti-VEGF therapy Lucentis is licensed from Genentech/Roche, and Novartis holds the product’s non-U.S. commercialization rights. Genentech/Roche is responsible for marketing Lucentis in the United States.
As of 2015, Novartis reports a collection of products under its Respiratory classification. During the first six months of the year, Respiratory generated sales of $791 million, up 5 percent in U.S. dollars and 23 percent cc versus first-half 2014. Leading this segment in sales is the Growth Product Xolair, which generated 2014 sales of $777 million (up from the 2013 sum of $613 million) and first-half 2015 sales reached $374 million (compared to $370 million during the one-year-earlier period).
Novartis jointly promotes Xolair with Genentech/Roche in the United States and shares a portion of the operating income, but does not book U.S. sales. As a treatment for moderate-to-severe or severe persistent allergic asthma, all non-U.S. sales for the drug are booked in the Respiratory franchise.
Xolair continued to grow strongly globally during the first half of 2015, according to Novartis. The medicine is approved in the EU, Switzerland and 40 other countries for treating chronic spontaneous urticaria (CSU) – also known as chronic idiopathic urticaria (CIU) – for which Xolair is approved in the United States, Canada and Australia. The medicine has been launched for CSU/CIU in at least 39 countries.
Also part of the Respiratory segment is Novartis’ COPD portfolio. The portfolio includes Ultibro Breezhaler, Onbrez Breezhaler/Arcapta Neohaler and Seebri Breezhaler. Those Growth Products combined to produce 2014 sales of $484 million, well ahead of the prior year total of $256 million. For the first six months of 2015, the COPD medicines generated joint sales of $283 million, compared to $212 million in January-June 2014.
The LABA/LAMA Ultibro Breezhaler is a first-in-class once-daily dual bronchodilator approved in 70-plus countries outside the United States (including the EU and Japan). Launched in more than 40 countries, first-half 2015 sales reached $118 million compared to $36 million in 1H 2014.
Ultibro Breezhaler is a fixed-dose combo of indacaterol and glycopyrronium bromide. In the EU, the product is indicated as a maintenance bronchodilator treatment to relieve symptoms in adult patients with chronic obstructive pulmonary disease. A U.S regulatory application has been filed with FDA.
The once-daily inhaled LAMA Seebri Breezhaler (glycopyrronium bromide) also continues to grow globally. Sales increased from $58 million in 2013 to $146 million for 2014. First-half 2015 sales amounted to $75 million, an increase of 34 cc from the 2014 first-half total.
As maintenance bronchodilator treatment to relieve symptoms of patients with COPD, Seebri Breezhaler is cleared for marketing in 80-plus countries. A new drug application has been filed with U.S regulators. Glycopyrronium bromide was exclusively licensed to Novartis during April 2005 by Vectura and its joint-development partner Sosei.
The once-daily inhaled LABA Onbrez Breezhaler/Arcapta Neohaler accounted for 2014 sales of $220 million, compared to the 2013 amount of $192 million. Sales in first-half 2015 were recorded as $90 million, down from the one-year-earlier tally of $109 million.
Composed of indacaterol, Onbrez Breezhaler/Arcapta Neohaler is indicated as maintenance bronchodilator treatment of airflow obstruction in adult patients with COPD. The product has been approved in more than 100 countries, including the United States. Onbrez and Arcapta are delivered through the low-resistance Breezhaler/Neohaler inhalation device.
Alcon offers the world’s widest spectrum of eye-care products, according to Novartis. Net sales for the business advanced 3 percent (+6 percent cc) to $10.83 billion during 2014. Surgical franchise sales grew 5 percent (+7 percent cc) to $4.07 billion based on strong sales of equipment, led by the market introduction of the Centurion phacoemulsification cataract platform and Verion image-guided pre-operative diagnostic system, continued growth of the LenSx femtosecond laser platform, and growth in cataract and vitreoretinal disposables. With 2014 sales of $4.21 billion (+3 percent, +5 percent cc), Ophthalmic Pharmaceuticals was paced by double-digit growth of Systane, Ilevro and fixed-dose glaucoma combo products offset by weak allergy and otic seasons in the United States and Japan. Vision Care (+2 percent, +4 percent cc) sales came in at $4.21 billion, benefitting from launches of innovative contact lenses — including Dailies Total1 and AirOptix Colors — partially offset by decreased contact lens care sales.
Net sales for Alcon during first-half 2015 totaled $5.12 billion (-6 percent, +2 percent cc). Surgical franchise sales of $1.88 billion (+2 percent cc) grew modestly in constant currencies, as solid cataract and vitreoretinal consumables sales were partly offset by lower equipment sales, as well as softer sales of IOLs despite total IOL unit growth, according to the company. Ophthalmic Pharmaceuticals grew in constant currencies (+3 percent cc) to $2.06 billion, fueled by double-digit growth of Systane in dry eye and fixed-dose combo products in glaucoma, offset by weaker sales in the United States and Asia. First-half 2015 Vision Care sales of $1.19 billion (+1 percent cc) were led by continued strong uptake of Dailies Total1 and AirOptix Colors, offset by weaker U.S. second-quarter sales of contact lenses and a continued decline in contact lens care solutions.
Globally, Sandoz is the No. 2 provider of generic medicines and ranks first in differentiated generics, including medicines that are difficult to develop and manufacture. Sandoz is also a leading biosimilars business, with three products on the market and a strong clinical development pipeline.
Net sales for Sandoz in 2014 rose 4 percent (+7 percent cc) to $9.56 billion, as volume growth of 15 percentage points more than offset 8 percentage points of price erosion. The growth performance was spurred by strong retail generics and biosimilars sales growth — including the Diovan monotherapy authorized generic launch — in Asia (excluding Japan) (+15 percent cc), the United States (+14 percent cc), Latin America (+10 percent cc) and Canada (+9 percent cc). Biosimilars improved 23 percent (cc) versus the 2013 result to reach $514 million.
Sandoz first-half 2015 net sales totaled $4.5 billion (-3 percent, +10 percent cc) as volume growth of 15 percentage points more than offset 5 percentage points of price erosion. All regions grew during the period compared to first-half 2014, paced by double-digit growth in the United States (+20 percent cc), Asia-Pacific (+13 percent cc) and Latin America (+23 percent cc).
Biopharmaceuticals worldwide sales in first-half 2015 improved 45 percent (cc) to $368 million. Anti-Infectives franchise sales reached $724 million (+16 percent cc), backed by a strong flu season in the first months of 2015, restored production capacities after quality upgrades in the previous year and favorable market conditions.
Recent product approvals and pipeline updates
The R&D program for Novartis yielded 15 major submissions and 13 new product approvals in major markets during 2014. Among the company’s 200-plus projects in clinical development, Novartis made significant progress in 2014, including on potential new treatments for heart failure and cancer. New drug approvals during the year included Zykadia (ceritinib) for lung cancer in the United States as well as Cosentyx (secukinumab) for psoriasis and psoriatic arthritis in Japan. In 2015, Novartis has sustained continued pipeline progress with positive regulatory decisions and important clinical trial data released.
Novartis’ new heart failure medicine Entresto was recommended by the Committee for Medicinal Products for Human Use (CHMP) for EU approval during September 2015. The positive opinion from the European Union’s review body puts Entresto on track to be approved for patients with symptomatic chronic heart failure and reduced ejection fraction (HFrEF) across Europe by the end of 2015. Swissmedic during September 2015 approved Entresto to reduce the risk of cardiovascular mortality and morbidity in patients with HFrEF.
Entresto (sacubitril/valsartan) was studied in the world’s largest heart failure trial, which was stopped early on the strength of results demonstrating a 20 percent reduction in cardiovascular deaths compared to the ACE inhibitor enalapril. Entresto works with a mechanism of action of an angiotensin receptor neprilysin inhibitor (ARNI) that reduces the strain on the failing heart. As a twice-daily tablet, the drug acts to enhance the protective neurohormonal systems of the heart (NP system) while simultaneously suppressing the harmful system (the RAAS).
In the United States, Entresto was approved and launched in July 2015 for chronic heart failure with reduced ejection fraction. The FDA approval, expedited through the regulatory body’s priority review process, was the first anywhere worldwide for the first-in-class ARNI.
EU marketing clearance was granted in September 2015 for Farydak, a first-in-class anticancer agent approved for patients with multiple myeloma. Farydak (panobinostat) was approved in the EU for patients with multiple myeloma who received at least two prior regimens, including bortezomib and an immunomodulatory agent. The new medicine may help reset key cell function in multiple myeloma (MM) via epigenetic activity.
Farydak received accelerated approval in the United States during February 2015. The histone deacetylase (HDAC) inhibitor in combination with bortezomib anddexamethasone is cleared for marketing in Chile and Japan for certain patients with previously treated MM.
Sandoz during September 2015 began introducing the first biosimilar in the United States, Zarxio (filgrastim-sndz). FDA marketing clearance was granted on March 6, 2015. Zarxio is approved for all indications included in the label for the reference product Neupogen, which is marketed by Amgen Inc. and has proven clinical value in treating patients at increased risk of neutropenia.
Revolade (eltrombopag) in September 2015 became the first approved therapy in the EU for severe aplastic anemia (SAA) patients who have not responded to other treatments. SAA is a rare blood disorder in which the bone marrow does not make enough red blood cells, white blood cells and platelets. Revolade was approved for treating adults with SAA who were either refractory to prior immunosuppressive therapy or heavily pretreated and are unsuitable for hematopoietic stem cell transplant.
Revolade is approved in 100-plus countries for treating thrombocytopenia in adult patients with chronic immune (idiopathic) thrombocytopenic purpura (ITP) who have had an inadequate response or are intolerant to other treatments. The drug is available in more than 45 countries for treating thrombocytopenia (low blood platelet counts) in patients with chronic hepatitis C to allow them to initiate and maintain interferon-based therapy. Eltrombopag is marketed as Promacta in the United States for once-daily use for SAA patients who have had an insufficient response to IST and for treating children 1 year and older with chronic ITP who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy.
In August 2015, EU marketing clearance was granted to Odomzo 200 mg capsules for treating adult patients with locally advanced basal cell carcinoma (laBCC) who are not amenable to curative surgery or radiation therapy. Odomzo (sonidegib, formerly LDE225) received U.S. regulatory clearance during July 2015 for treating adult patients with laBCC that has recurred following surgery or radiation therapy, or those who are not candidates for surgery or radiation therapy. The drug was approved in Switzerland for treating advanced BCC that is not amenable to curative surgery or radiotherapy on June 30, 2015. Regulatory approval also has been granted in Australia, with other regulatory submissions under way globally.
Odomzo is an oral, selective smoothened inhibitor (SMO). A molecule that regulates the hedgehog (Hh) signaling pathway, SMO plays a critical role in stem cell maintenance and tissue repair, and in advanced basal cell carcinoma.
During June 2015, Sandoz’s Glatopa was approved and launched in the United States for relapsing multiple sclerosis. Glatopa is the first fully substitutable generic version of Teva Pharmaceutical Industries Ltd.’s blockbuster Copaxone (glatiramer acetate injection) 20 mg/ml once-daily MS therapy. Glatopa was developed in collaboration with Momenta Pharmaceuticals and produced entirely in the United States.
The European Commission approved Zykadia during May 2015 to treat adult patients with anaplastic lymphoma kinase (ALK)-positive advanced non-small cell lung cancer previously treated with the ALK inhibitor crizotinib. Outside the EU, Zykadia is approved in at least 10 countries including the United States, with additional regulatory submissions under way around the globe.
Worldwide regulatory submissions —including in the United States and EU — were filed during second-quarter 2015 for Cosentyx in ankylosing spondylitis (AS) and psoriatic arthritis (PsA). Novartis anticipates a CHMP opinion for EU approval during first-half 2016 and potential FDA marketing clearance in the second half of 2016 for both indications. Novartis says Cosentyx is projected to become a blockbuster medicine that could reach $4-5 billion in psoriasis and the arthridities, assuming success in the already-approved indications.
U.S. and EU approval were granted for Cosentyx during January 2015. FDA approved the drug for treating moderate-to-severe plaque psoriasis in adult patients who are candidates for systemic therapy (a drug that is absorbed into the bloodstream and distributed to all parts of the body) or phototherapy (light therapy). The European Commission gave the drug the green light as a first-line systemic treatment of moderate-to-severe plaque psoriasis in adults who are candidates for systemic therapy.
Novartis announced at the beginning of October 2015 promising results from the pivotal Phase III FUTURE 1 trial for secukinumab in psoriatic arthritis. Secukinumab is the first interleukin-17A (IL-17A) inhibitor to show efficacy in a Phase III trial in patients with active PsA. According to research, IL-17A plays a significant role in driving the body’s immune response in psoriasis and spondyloarthritis conditions, including PsA and ankylosing spondylitis.
Additional positive study results were revealed by Novartis pertaining to Cosentyx during second-quarter 2015. New one-year results demonstrated sustained Cosentyx efficacy in ankylosing spondylitis. Data from the MEASURE 2 pivotal Phase III trial of secukinumab in AS showed that 74 percent of patients achieved clinically significant improvement in their symptoms after one year of treatment. Cosentyx was demonstrated to have superior efficacy in difficult-to-treat locations of plaque psoriasis.
A Phase III study demonstrated that Afinitor extends progression-free survival (PFS) in patients with advanced gastrointestinal or lung nonfunctional neuroendocrine tumors, as reported by Novartis in May 2015. The Phase III RADIANT-4 study met its primary endpoint, showing that Afinitor significantly extended PFS versus placebo in patients with advanced non-functional NET of GI or lung origin. The RADIANT-4 trial is serving as the basis of global regulatory submissions during 2015.
Novartis reported during May 2015 that two pivotal U.S. Phase III study programs for QVA149 (indacaterol/glycopyrronium bromide, marketed as Ultibro Breezhaler internationally) and NVA237 (glycopyrronium bromide, marketed as Seebri Breezhaler overseas) in patients with moderate-to-severe chronic obstructive pulmonary disease met their primary and secondary endpoints. QVA149 improved lung function, breathlessness and health-related quality of life in moderate-to-severe COPD patients, per EXPEDITION study results. GEM 1 & 2 trials demonstrated that NVA237 provided significant and clinically meaningful improvements in lung function in moderate-to-severe COPD patients.
Going back to first-quarter 2015, Jadenu (deferasirox) was approved by U.S. regulators in March. Representing a new formulation of Novartis’ Exjade that is marketed for treating chronic iron overload due to blood transfusions (deferasirox), Jadenu is the first once-daily oral tablet for iron chelation. Taken with or without food, the drug simplifies daily treatment administration for chronic iron overload patients.
In early February 2015, Alcon announced FDA approval of Pazeo (olopatadine hydrochloride ophthalmic solution) 0.7 percent for ocular allergy itch relief. The medicine was developed with efficacy data at 24 hours, post dose, to provide one-drop daily ocular itch relief associated with allergic conjunctivitis.
Bexsero gained FDA marketing clearance during January 2015 for preventing meningitis B, a leading cause of bacterial meningitis in the United States. The meningitis B vaccine’s two-dose regimen provides a flexible dosing schedule, with the first and second doses administered at least one month apart.
Other transactions and collaborations during 2015
To begin third-quarter 2015, Novartis announced a global partnership with Amgen to develop and commercialize pioneering neuroscience treatments. Novartis and Amgen intend to jointly develop and commercialize a BACE inhibitor program in Alzheimer’s Disease (AD), with Novartis’ oral therapy CNP520 being the lead molecule. The companies additionally plan to jointly develop and commercialize Amgen’s migraine portfolio, including the fully human monoclonal antibody AMG 334 with first phase III data anticipated during 2017. According to Novartis, the partnership reinforces its continued dedication to developing and bringing innovative neuroscience treatment options to patients. For the migraine program, Novartis holds worldwide co-development and commercial rights outside the United States, Canada, and Japan.
The Amgen partnership follows two other developments in the Novartis neuroscience portfolio intended to complement its neuroscience presence and pipeline in, among others, multiple sclerosis, AD and neuromuscular diseases. Novartis acquired Spinifex Pharmaceuticals during July 2015, adding the phase II compound EMA401 for treating neuropathic pain to the portfolio. The novel angiotensin II type 2 receptor antagonist is a differentiated treatment for neuropathic pain acting outside the blood-brain barrier, which is expected to avoid significant CNS side effects.
As for the other development, Novartis inked a deal one month later to acquire all remaining rights to ofatumumab from GSK for relapsing-remitting multiple sclerosis (RRMS) and certain other autoimmune indications. Novartis previously acquired the drug’s rights for oncology indications for which it is marketed under the trade name Arzerra.
The fully human monoclonal antibody ofatumumab targets CD20 and is administered by subcutaneous injection. The novel treatment acts by inducing depletion of B cells in the lymphatic tissues; B cells play a significant role in MS.
Novartis traded mid-stage clinical assets for equity with Mereo BioPharma Group Ltd., as announced in late July 2015. The transaction involves compounds in fields of unmet medical need including BPS-804, to improve bone density in brittle bone syndrome, an orphan disease; BCT-197 for acute exacerbations in COPD, and BGS-649 for obese men with hypogonadotrophic hypogonadism to normalize testosterone levels. Novartis gains an equity stake in Mereo and will share in the success of the development of these drug compounds, including receiving payments on milestones and royalties on future commercial sales. As a new UK-based biotechnology company, Mereo’s mission is to acquire and rapidly develop innovative medicines.
In January 2015, Novartis inked collaboration and licensing agreements with Intellia Therapeutics for the discovery and development of new medicines using CRISPR genome editing technology and Caribou Biosciences for the development of drug discovery tools. Intellia and Caribou are regarded as two of the leading biotech companies developing this novel technology. The Intellia collaboration is investigating therapeutic options for using CRISPR to engineer chimeric antigen receptor T-cells and hematopoietic stem cells. The Caribou collaboration is concentrated on using CRISPR as a research tool for drug discovery.
