Pharma Stock Roundup: J&J, NVS' Q2 Earnings, Merck Drug Gets Tentative FDA Nod

Second quarter earnings season for the pharma sector kicked off this week with industry bellwether Johnson & Johnson JNJ and Swiss pharma giant, Novartis NVS, reporting results. Meanwhile, Merck MRK gained tentative approval from the FDA for its follow-on biologic basal insulin though the company cannot launch immediately due to an ongoing patent infringement case.

Recap of the Week’s Most Important Stories

A Look at J&J and Novartis’ 2Q Results: Industry bellwether J&J and Swiss pharma giant, Novartis, both reported second quarter results earlier this week. J&J surpassed earnings expectations though revenues fell short. The company raised its outlook for the year with operational sales growth expected to accelerate in the second half. Some of the factors that should help this include the earlier launch of Tremfya, a more moderate erosion of the U.S. Remicade business compared to previous expectations as well as the continued strong performance of key drugs. Contribution from new products in the Medical Devices segment is also expected to pick up in the back half of the year with strong growth in the Vision Care segment expected to continue. The Consumer segment, however, will continue to be impacted by weaker macroeconomic dynamics (Read more: J&J Beats on Q2 Earnings, Lags Sales, Ups 2017 View).

Novartis’ second quarter results were better than expected with the company beating on both earnings and revenues. Entresto and Cosentyx continued to perform well while Sandoz sales declined reflecting pricing pressure in the U.S. Meanwhile, Alcon’s performance improved encouraging the company to raise its Alcon sales outlook to low single digit growth (Read more: Novartis Tops Q2 Earnings, Sandoz Faces Pricing Pressure). Novartis stock has gained 17.3% year to date, outperforming the 12.2% rally of the industry it belongs to.

Tentative Approval for Merck’s Follow-On Basal Insulin: Merck got tentative approval from the FDA for its biosimilar version of Sanofi’s SNY blockbuster diabetes drug, Lantus. Lusduna Nexvue (insulin glargine injection), technically a follow-on biologic basal insulin, has been developed by Merck with funding from Samsung Bioepis.

However, Merck will have to wait before it can launch the product due to an automatic 30-month stay resulting from a patent infringement lawsuit initiated by Sanofi in Sep 2016. Merck cannot launch its product before the expiry of the stay period or a favorable court ruling, whichever occurs first.

We note that a biosimilar version of Lantus is already on the market in the form of Lilly LLY and Boehringer Ingelheim’s Basaglar which entered the market in mid-Dec 2016. Lantus sales declined 14.1% in the first quarter of 2017 including a 20.9% decline in the U.S. reflecting lower average net price, patient switches to Toujeo and the impact of formulary exclusions. Pricing pressure will increase once Merck’s product enters the market.

Sanofi and Merck are both Zacks Rank #2 (Buy) stocks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sanofi in Nanobody Deal with Ablynx: Sanofi has entered into a research collaboration and global exclusive licensing agreement with Belgian company, Ablynx, focused on the development and commercialization of Nanobody-based therapeutics for the treatment of various immune-mediated inflammatory diseases. With this deal, Sanofi will gain access to certain Nanobodies in Ablynx’s existing portfolio as well as to Ablynx’s scientists and proprietary Nanobody platform. Sanofi will make an upfront payment of €23 million. Other financial details include up to €2.4 billion in milestone payments as well as tiered royalties. With this collaboration, Sanofi is looking to expand its drug discovery pipeline in immunology.

EU Nod for AstraZeneca’s Kyntheum: AstraZeneca’s AZN psoriasis treatment Kyntheum gained approval in the EU plus Iceland, Liechtenstein and Norway. The company said that its partner LEO Pharma gained approval for the use of the biologic medicine for the treatment of moderate-to-severe plaque psoriasis in adults who are candidates for systemic therapy.

Kyntheum was approved in the U.S. under the trade name Siliq in Feb 2017 with a black box warning regarding risk in patients with suicidal thoughts or behavior.

Performance

Large Cap Pharmaceuticals Industry 5YR % Return

Large Cap Pharmaceuticals Industry 5YR % Return

The NYSE ARCA Pharmaceutical Index gained 1.8% over the last five trading sessions. Among major stocks, AstraZeneca was up 4.6% while J&J gained 3.6%. Over the last six months, AstraZeneca was up 29.4% while J&J gained 21.2% (See the last pharma stock roundup here: FDA Panel Votes for Novartis CAR-T Drug, SNY to Buy Vaccines Co.).

What's Next in the Pharma World?

Watch out for second quarter earnings results from companies like Lilly, Bristol-Myers BMYand AstraZeneca among others.

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Sanofi (SNY) : Free Stock Analysis Report
 
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Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
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Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
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