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AZ, Merck, Novartis, And Pfizer Have Stripped Product Lines
Nov 26, 2018

1. AstraZeneca: Responding to patent cliffs

 

By selling palivizumab, AstraZeneca is expected to receive $1 billion in cash and an 8% stake in the stock and SOBI (approximately $500 million). The total value of the deal is expected to reach $2.3 billion, which is the biggest profit for AstraZeneca to sell assets in the past five years.

 

AstraZeneca reported last week that palivizumab's pharmaceutical sales in the third quarter fell 27% to $133 million. Sales of pharmaceuticals outside the United States, led by Abbott, increased 4% to $281 million. In the face of unsatisfactory market performance, AstraZeneca decisively "swinged swords and sleeves" is in line with its bold character.

 

Since Pascal took office, AstraZeneca has been losing weight. Just last month, AstraZeneca had just sold certain rights to the Nexium and Vimovo drugs to the German pharmaceutical company Grünenthal for $922 million. Subsequently, AstraZeneca reached an agreement with Covis Pharma to sell the rights of respiratory drugs Alvesco, Omnaris and Zetonna for $350 million. Earlier, AstraZeneca had signed similar asset transfer agreements with Recordati, Aspen, Ironwood and Pfizer, making profits of billions of dollars.

 

AstraZeneca's sales in FY2017 totaled US$20.152 billion, a decrease of approximately US$1.2 billion compared to 2016. Due to the impact of the patent cliff, the company's total sales fell by more than 13 billion US dollars in the six years from 2011 to 2017. It is very difficult to turn around in the short term. A batch of patented drugs, including global sales of 2.803 billion US dollars in 2017 and one of the company's main products, Symbicort, is also facing the problem of patent expiration. In response to the crisis of the patented cliff, AstraZeneca's optimization of the product line is constantly underway.

 

Pascal once praised the business exchange between Novartis and GSK. "The separation of relatively weak business between pharmaceutical giants and the strengthening of advantageous product lines are conducive to the company's development." He also publicly stated that he hopes to increase the company's profitability by cutting costs and increasing cash flow, mainly through the sale of old drugs, so that more energy and resources can be focused on more profitable drug development opportunities. . From the latest data, it seems that this strategy has begun to take effect.

 

According to AstraZeneca's third-quarter earnings report, global sales of 9% year-on-year were achieved. Driven by its key products, including the lung cancer drug Teresa, the product's sales in the third quarter exceeded $506 million. The lung cancer drug Imfinzi and the diabetes treatment drug Permex also performed well, with sales of $187 million and $152 million, respectively.

 

2. Merck: Return to Pharma

 

As the oldest pharmaceutical company, it has returned to its core business in recent years, no longer pursuing diversification, and the trend of focusing on the main business is becoming more and more obvious.

 

In 2017, Merck issued a message saying that in order to alleviate the financial pressure, it is considered to sell all or part of its consumer health business. Medical health, life sciences, and high-performance materials are Merck's three business segments, and pharmaceutical health is the largest segment of sales data, including prescription drug business and consumer health business. The Consumer Health Division has approximately 3,800 employees, including Neorobion, Bion, Seven Seas, Nasivin and other well-known brand products, including maternal and child folic acid, vitamins and other varieties.

 

According to the financial report, the consumer health business in 2016 created 860 million euros (about 1.02 billion US dollars) in sales for Merck, accounting for only 5.7% of the Merck Group's business. According to survey data, the global retail sales of consumer health products in 2017 is estimated at $233.2 billion. Merck ranks 32nd in the consumer health business and 0.4% in this very fragmented market. Such a performance for Merck, the consumer health business has become a "chicken".

 

Finally, in April, Procter & Gamble agreed to acquire Merck's consumer health unit for $4.2 billion, and P&G will receive the vitamin brand Seven Seas and the larger Latin American and Asian markets. As the transaction progresses, 3,300 Merck employees will be transferred to P&G. The transaction price is 19 times that of Merck's operating profit last year, and the valuation is in the high price range of the industry.

 

Some analysts analyzed that this transaction will help Merck focus on the medical field and refurbish its pipeline.

 

The funding will allow Merck to reduce its debt more quickly, giving it greater flexibility in its operations, including chemicals, pharmaceuticals and laboratory equipment, even though the company has ruled out acquisitions worth more than 500 million euros this year. plan. Merck said that the sale of its consumer health business has not changed its goal of maintaining a net sales of established prescription drugs, such as the anticancer drug Erbitux and the multiple sclerosis treatment drug Rebif will be stable supply by 2022.

 

3. Novartis: Strengthening Advantage Business

 

This year, Novartis's biggest move, in addition to layoffs, should be the continuous divestiture business. Unlike many businesses that want to abandon non-profit, loss-making businesses, Novartis has also cut off its antibiotic market, which is a good market.

 

In July of this year, Novartis announced that it would terminate the early development of antibiotics and antiviral drugs in Emeryville, California, and lay off about 140 people. Although the field has a good scientific research foundation, Novartis said, "It has been decided to devote limited time and energy to other areas of innovative medicine that are more capable of developing positive impacts on patients. This is also a priority and rational distribution of Novartis. Some resources. I believe that the clinical needs for these types of drugs are clear, and maximizing the field will definitely help patients improve their situation in the future. Novartis will continue to actively engage with companies that are involved in and developing drugs in the field of antibiotics. Collaborate and conduct external licensing discussions."

 

In March of this year, Novartis announced that it had reached an agreement with GlaxoSmithKline (GSK) to sell its 36.5% consumer health joint venture (JV) shares to GSK for $13 billion. Last year, the consumer health business generated sales of 7.8 billion pounds ($11.1 billion). The sale will allow Novartis to further focus on the growth and growth of its core business. According to previous reports from Bloomberg, Jay Bradner, head of Novartis R&D, revealed that after conducting a comprehensive pipeline asset assessment, Novartis has reduced its number of new drug projects from 430 to 340. The performance of the 90 new drug projects abandoned in clinical treatment has left Novartis with confidence and will be shelved or transferred.

 

In June, Novartis announced that it plans to spin off all of Alcon's eye care equipment business and launch a $5 billion stock repurchase. From 2008 to 2011, Novartis spent $52 billion to acquire Alcon, a subsidiary of Ophthalmology Products, from Nestlé, and became the world's largest manufacturer of ophthalmic health products. However, in recent years, its performance has been slightly depressed. Since the third quarter of 2014, Alcon's performance has declined for several quarters. Although Novartis’s 2017 financial report shows that Alcon has resumed growth and sales growth is 4%, Novartis has made up its mind to divest it as a “non-core business”.

 

Novartis is currently implementing its new corporate strategy: divesting non-core businesses and consolidating its leading position in the prescription drug sector. In a quarterly report released this year, Novartis also said that it would become a more focused pharmaceutical company. Novartis has a good hand in the field of innovative medicine. In the past two decades, Novartis has been known for its innovative drugs and mergers and acquisitions, and has achieved great commercial success. From the recent split and strip performance of Novartis, it is undoubtedly to focus on the field of medical innovation and to divest non-core assets. The business divested by Novartis is mainly due to the slowdown in growth and weak market development prospects. The divestiture of companies that have dragged down profits will help boost profits and maintain share prices.

 

4. Pfizer: Gathering prescription drugs and vaccines

 

In the business sector where multinational pharmaceutical companies were divested this year, the “consumer health care business” has become the hardest hit. Pfizer is no exception. As the world's largest pharmaceutical company, it announced in July that it will be reorganized into three business units: innovative drugs, mature drugs and health drugs (over-the-counter drugs).

 

After the reorganization, the consumer health products under the jurisdiction of the original innovative medical department will be independently become the new health drug department, and the biosimilar drugs, tumor, inflammation and immunization services originally belonging to the mature drug department will be merged into the innovative medicine department. The mature pharmaceutical business will include most of Pfizer's patent-pending solid oral drug brands, such as Lerica, Lipitor, Luohuo, Viagra, and some generic drugs.

 

Prior to his resignation, Ruide said that this was a “natural evolution” that would help each sector achieve better growth. Pfizer, a drug used to treat diabetic neuropathic pain and neuropathic pain in spinal cord injury, will expire in the US market at the end of this year.

 

According to Pfizer's 2017 annual report, the revenue of the innovative pharmaceutical business (including health drugs) accounted for nearly 60%, about $31.4 billion. The three prescription drugs/vaccines with the highest sales revenue were PREVNAR 13 (Pneumococcal 13-valent conjugate vaccine) US$5.6 billion, Leroka US$5.065 billion, and Ibrance for breast cancer US$3.126 billion.

 

For the purpose of Pfizer's restructuring, Wall Street's current view is that it is accelerating the divestiture of the consumer health business, and will gather R&D and marketing expenses in its core businesses, namely prescription drugs and vaccines, with a view to reducing costs and increasing profit margins. The direct reason may be that Bloomberg reported in October last year that Pfizer announced that the company is considering divesting the health drug business including “self-contained high-gloss” products such as Good Deposit, Calcium, and Huifeining. . Or spin off, sell, or otherwise trade the business from Pfizer in whole or in part.

 

There are rumors that Pfizer is less than 99 billion and not selling. Globally renowned multinational pharmaceutical companies, including GlaxoSmithKline, Johnson & Johnson, Sanofi, etc., are potential buyers. The department's potential sale valuation rose to $20 billion in March this year.

 

In terms of divestiture business, Pfizer has always been "fine-tuned", and the past few business divisions have brought "sweetness" to Pfizer. For example, in 2013 it transferred the animal health business to other shareholders, whose share price has more than tripled so far. The infant nutrition business was sold to Nestlé at a price of 78.5 billion.



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