healthcare finance 03.04 · 2013-08-26 · berg. please contact our reprints and permissions group...

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BRIEF Healthcare Finance 03.04.13

Medical Meetings

■ American Academy of Dermatology (AAD) 2013 Annual Meeting, Miami Beach, Florida (March 1-5)

■ 20th Conference on Retroviruses and Opportunistic Infections (CROI), Atlanta, Georgia (March 3-6)

■ 2013 International Symposium on Tar-geted Anticancer Therapies (TAT) Paris, France (March 4-6)

■ International Conference on Alzheim-er’s and Parkinson’s Diseases (AD/PD) 2013, Florence, Italy (March 6-10)

clinical catalysts

■ Pfizer/Pain Therapeutics/Durect-Remoxy (controlled-release oxycodone): Confirmatory bioavailability studies to assess PK profile of modified formula-tion compositions, to address questions in the complete response letter of June 2011 (Early 2013)

■ Transcept Pharma-TO-2061 (low dose ondansetron): Decision on further development as an adjunctive treat-ment for obsessive compulsive disorder (OCD) in patients who have responded inadequately to currently approved treat-ments, following top-line data of Phase II trial in Dec 2012 that did not meet primary endpoint (Early 2013)

■ Trius/ Bayer-tedizolid phosphate (torezolid phosphate): Top line data from second Phase III trial ESTABLISH 2 (TR701-113) of switching from initial IV administration to oral administration in acute bacterial skin and skin structure infections (ABSSSI) caused by Gram-positive bacteria (End 1Q13)

For a Full list oF clinical catalysts see the BloomBerg

industries catalyst calendar: Bi Phrm sBcalend <go>

By AnDREw BEREnS, MD, SAM FAzELI AnD GRACE GuO, BLOOMBERG InDuSTRIES theravance and glaxosmithKline’s lung disease drug Breo will be reviewed by a

panel of experts advising the FDA on March 7. Briefing documents will be published by March 5. The Pulmonary-Allergy Drugs Advisory Committee will convene to discuss drug as a long-term maintenance treatment of airflow obstruction and for reducing exacerbations in patients with chronic obstructive pulmonary disease (COPD). The agency is expected to make a decision regarding approval by May 12.

Theravance, GSK’s Breo Faces FDA Panel

the WeeK ahead: FDA reviews Depomed and noven’s drugs for hot flashes and cancer risk for calcitonin salmon; J&J, Bayer, nuvo, Covidien seek u.S. approvals; Companies present data at ACC and CROI. Pages 1-3

BlooMBerg insight: FDA asked to protect biotech companies against biosimilars; Telemonitoring of trials may boost pharma profits. Pages 3-4.

WeeK in revieW: Bayer, Onyx gain new Stivarga approval; nICE recommends Bristol, Pfizer’s Eliquis. Pages 5-6.

Key catalyst insight: Arena, Eisai’s Belviq price premium may pose similar adoption hurdles to Vivus’ Qsymia without broad coverage. Page 8.

theMes and drivers: Large pharmaceutical sales declined $26 billion in 2012 because of patent expirations. Page 9.

iPo & short interest tracKer: Stemline Therapeutics continues to gain since debut; Short interest rises in Incyte ahead of FDA decision on Jakafi dosing. Pages 11-12.

Q&a: BDO’s Laura Kalick on the Community Health needs Assessment. 3.

HEALTHCARE wATCH

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Breo May Be Backbone of GSK's Respiratory Franchise

mepolizumab

UMEC monotherapy

GSK961081

UMEC/VI

Breo

Advair

Source: Bloomberg

www.bloombergbriefs.com

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The companies want to market the drug, which is a once-daily dose of fluticasone fu-roate “FF” and vilanterol “VI” (FF/VI) as Breo in the u.S. The companies are also seeking European approval for the drug under the brand name Relvar. The EMA has accepted the application as a treatment for COPD and asthma.

The treatment, a combination of an inhaled corticosteroid (ICS), “FF” and a long-acting beta-adrenergic agonist (LABA), “VI, ” is delivered through a new dry powder inhaler called Ellipta. The therapy may succeed GSK’s blockbuster Advair, which also combines an ICS and a LABA. Competing products include novartis’ QMF149, which is in Phase II development for COPD and asthma and Boehringer’s olodaterol, which was recom-mended for approval in COPD by the same panel early this year.

FDA Panel Meets for Depomed, Noven’s Hot Flash DrugsBy AnDREw BEREnS, MD, GRACE GuO, THOMAS SMITH, BLOOMBERG InDuSTRIES

The FDA’s Reproductive Health Drugs Advisory Committee will meet on March 4 to discuss new drug applications (nDAs) from depomed and noven for agents that treat moderate to severe vasomotor symptoms (VMS) associated with menopause, or hot flashes.

The FDA rejected Depomed’s proposed name Serada for its extended-release formula-tion of gabapentin and now the company is suggesting it be called Sefelsa. The drug has a target Prescription Drug user Fee Act (PDuFA) action date of May 31. In the afternoon, the panel will discuss noven’s application for low-dose mesylate salt of paroxetine. noven, a subsidiary of hisamitsu Pharmaceutical, has been assigned a PDuFA date of June 28. According to briefing documents released last week, the drugs yielded inconsistent re-sults in trials. Each drug had an effect after four weeks that did not persist after 12 and 24 weeks, the FDA said in the report. Paroxetine mesylate showed a treatment effect on hot flash frequency after 24 weeks in one study and Depomed’s gabapentin didn’t reduce the frequency of hot flashes after 12 weeks in any of the three studies on the drug. Two trials on gabapentin showed the drug decreased the severity of hot flashes after four and 12 weeks, Bloomberg news reported. Both drugs also carry side effects that include suicidal thoughts, which need to be considered before approval.

FDA Explores Calcitonin Salmon Cancer Risk By AnDREw BEREnS, MD, GRACE GuO, THOMAS SMITH, BLOOMBERG InDuSTRIES

FDA advisers will meet on March 5 to review whether the benefit of calcitonin salmon, which is used for the treatment of postmenopausal osteoporosis (PMO), outweighs the potential risk of cancer. Calcitonin salmon products marketed in the u.S. include novar-tis’ Miacalcin injection and nasal spray and Upsher-smith/Unigene labs’ Fortical nasal spray. Par Pharmaceuticals, apotex and sandoz market generic formulations.

In documents published last week, the agency said the drugs may not reduce bone fractures enough to outweigh the cancer risks. In Europe, the Committee for Medicinal Products for Human use (CHMP) said that doctors shouldn’t prescribe nasal sprays containing calcitonin for PMO.

the week ahead…

By ASHOK CHAnDRA, InTELLECTuAL PROPERTy, BLOOMBERG LAw

recent lawsuits Filed

■ Depomed, Inc. v. watson Labo-ratories, Inc. - Florida, no. 13-CV-00342, Complaint (D. Del. Feb. 28, 2013)

u.S. Patent nos. 6,488,962; 6,723,340; 6,635,280; 6,340,475 (metformin hydrochloride)

GLuMETzA (Type 2 diabetes mellitus)

■ Endo Pharmaceuticals, Inc. v. watson Pharmaceuticals, Inc., no. 13-CV-00192, Complaint (E.D. Tex. Feb. 28, 2013)

u.S. Patent nos. 6,319,913; 6,579,865 (testosterone)

FORTESTA (testosterone re-placement)

■ Eli Lilly and Co. v. Accord Health-care Inc., uSA, no. 13-CV-00335, Complaint (S.D. Ind. Feb. 28, 2013)

u.S. Patent no. 7,772,209 (peme-trexed disodium)

ALIMTA (lung cancer; mesothe-lioma)

■ Purdue Pharma L.P. v. watson Laboratories, Inc. - Florida, no. 13-CV-01272, Complaint (S.D. n.y. Feb. 25, 2013)

u.S. Patent no. 8,337,888 (oxyco-done hydrochloride)

OXyCOnTIn (moderate to severe pain)

BiPhrm liti <go>

PATENT WATCH

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the week ahead…

J&J, Bayer Seek Additional Xarelto ApprovalBy AnDREw BEREnS, MD, GRACE GuO, BLOOMBERG InDuSTRIES

Johnson & Johnson and Bayer’s Xarelto (rivaroxaban) may gain FDA backing for the proposed indication of reducing the risk of secondary thrombotic cardiovascular events in patients with acute coronary syndrome (ACS). Bloomberg Industries estimates that the resubmitted application may have a target action date of March 7.

The companies failed to gain approval for this indication last June. Members of the FDA Cardiovascular and Renal Drugs Advisory Committee voted 6-4 against approval, citing concerns over “substantial” missing data from a significant number of patients in the Atlas ACS 2 Timi 51 trial that could affect the interpretation of results. Documents published by the FDA indicated that 15.5 percent of the patients in the study discontinued early, 8 percent withdrew consent and more than 1,000 patients had unknown vital status at the end of the trial. The study enrolled a total of 15,526 patients.

Nuvo, Covidien Osteoarthritis Drug May Gain FDA ApprovalBy AnDREw BEREnS, MD, GRACE GuO, BLOOMBERG InDuSTRIES

nuvo research and covidien’s next-generation Pennsaid (diclofenac sodium topical solution) may gain FDA approval this week as a treatment for the signs and symp-toms of osteoarthritis of the knee. The FDA has set a Prescription Drug user Fee Act (PDuFA) date of March 4, 2013.

Pennsaid is a topical non-steroidal anti-inflammatory drug (nSAID). The companies are seeking approval for a 2 percent formulation of the drug that is more viscous than the original 1.5 percent formulation and is applied twice each day versus four times a day for original Pennsaid.

Medicines Company Among Cardio Data Presenters at ACC By AnDREw BEREnS, GRACE GuO, ASTHIKA GOOnEwARDEnE, MICHAEL SHAH, BLOOMBERG InDuSTRIES

the Medicines company will present full results from its pivotal Phase III clinical trial of cangrelor, called the Champion Phoenix study, at the American College of Cardiology Scientific Sessions, in San Francisco from March 9-11.

Cangrelor is being developed to prevent platelet activation and aggregation that leads to thrombosis in the acute care setting, including patients undergoing percutaneous coro-nary intervention (PCI). In early January, the company reported the study met its primary endpoint and demonstrated a statistically significant improvement in ischemic outcomes compared with clopidogrel or Plavix. The company expects to submit data from this study and the Bridge trial for regulatory review in the u.S. and Eu this year.

roche and genmab will also present data from a Phase II trial of inclacumab (RG1512) in acute coronary syndromes (ACS) patients undergoing PCI. Inclacumab tar-gets a molecule that sends white blood cells to injured sites during inflammation. acorda will reveal data from a Phase I study of Glial Growth Factor 2 (GGF2) in heart failure. The company recently presented preclinical data for the agent in a stroke model at the Ameri-can Heart Association/American Stroke Association International Stroke Conference.

J&J, Medivir, Gilead Present Combination Data By AnDREw BEREnS, MD, GRACE GuO, BLOOMBERG InDuSTRIES

The first data from a trial testing the combination of Johnson & Johnson/Medivir’s TMC435 (simeprevir) and gilead’s GS7977 (sofosbuvir) in hepatitis C (HCV) will be pre-sented at the Conference on Retroviruses and Opportunistic Infections (CROI) on March 6. This Phase II study tested a once daily dose of the combination in null responders, or those with an insufficient response to prior treatments with interferons and ribavirin. Simeprevir is being studied in a number of HCV subpopulations and combinations. Data at the event will be the first from an interferon-free regimen and will include suppression of viral load through four weeks post-treatment (SVR4).

■ AMAG Pharma/Takeda-Fera-heme (Rienso, ferumoxytol): update on FDA acceptance of snDA for iron deficiency anemia in all patients regardless of the underlying cause who have failed or could not tolerate oral iron treatment (Feb./Mar. 2013)

■ Jazz Pharma-FazaClo(clozapine): PDuFA date for oral suspension formulation for treatment-resistant schizophrenia (Feb. 2013)

■ Johnson & Johnson- Stelara (ustekinumab): update on FDA acceptance of sBLA in psoriatic arthritis (Feb. 2013)

■ FDA and American Society of Clinical Oncology Public workshop: discussion of extending the qualifi-cation of minimal residual disease (MRD) detection as a prognostic biomarker to an efficacy/response biomarker in evaluating new drugs for the treatment of acute myeloid leukemia (AML). The primary focus will be on the biomarkers that are or will soon be ready for incorporation into clinical trials, and the technical and regulatory challenges for use of these markers (Mar. 4)

■ FDA Office of Regulatory Affairs (ORA), Dallas District Office and Society of Clinical Research Asso-ciates (SoCRA) Public workshop on FDA’s clinical trial require-ments: designed to aid the clinical research professional’s under-standing of the mission, responsi-bilities, and authority of FDA and to facilitate interaction with FDA representatives. The program will focus on the relationships among FDA and clinical trial staff, inves-tigators, and institutional review boards (Mar. 6-7)

For a Full list oF regulatory catalysts see the BloomBerg industries catalyst calendar

Bi Phrm sBcalend <go>

REGulATORy CATAlySTS


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BlOOMBERG INSIGHT

Fda Urged to consider Proper-ty rights of Biotech companiesBy BRIAn BRODERICK, BnA

The FDA should halt work on applica-tions for most biosimilar drugs in order to protect the property rights of makers of branded or reference biotech drugs, according to the washington Legal Foundation (wLF).

The public interest law group submitted comments to the FDA saying approval of biosimilars based on branded biologic applications submitted before March 2010 would require use of trade secret information that companies assumed would be protected. March 2010 is a key cutoff date, because that is when Congress approved the Biologics Price Competition and Innovation Act (BPCIA) as part of the Affordable Care Act, to create an FDA pathway for approval of two sorts of follow-on biologic drugs: interchangeable biologics, and biosimi-lars. Early in 2012, the FDA issued some guidance on the pathway for approvals of biosimilars, but the industry is await-ing more information.

abbott laboratories submitted a citizen petition to the FDA in April 2012, arguing that the FDA’s use of company trade secrets to approve a biosimilar would destroy the value of trade secrets and trigger a federal obligation to pay compensation under the Fifth Amend-ment’s Takings Clause.

In the petition, Abbott asked the FDA not to approve any biosimilar for its rheumatoid arthritis drug Humira

because if it did, FDA would have no choice but to disclose Abbott’s Humira-related trade secrets. The company said when it submitted its license application for Humira and the accompanying trade secrets to the agency in 2002, it did not expect that the agency would use its trade secrets to approve another com-pany’s products.

In support of the petition, wLF said that approving biosimilar drugs without considering potential compensation claims under the Constitution’s Takings Clause would erode property rights and public confidence in the reliability of the government’s promises.

However, the Generic Pharmaceuti-cal Association (GPhA) filed comments with the FDA in August 2012 urging the agency to deny Abbott’s citizen petition.

The GPhA said that nobody had filed a biosimilar application with the FDA yet, but Abbott wants the agency to de-cide, at the inception of this regulatory framework, that the process for reviews of biosimilar drugs is not consistent with the Takings Clause of the Constitution.

The generics group said the effect of granting Abbott’s petition would prevent competition from biosimilar drugs for at least 10 years and would thwart Con-gress’s main objective in enacting the 2010 law. under the Abbott scenario, the FDA could only consider biosimilars for those branded products that had their applications (BLAs) submitted to FDA after March 23, 2010. GPhA said the biosimilars law provides that a biosimilar

application cannot be submitted until four years after approval of the branded/reference product’s BLA, and no bio-similar can be approved until 12 years after the BLA approval.

This means no biosimilar application would be submitted until after March 2014, and the approval of such an ap-plication would not happen until after 2022, the generics group said.

The generics group said that granting the Abbott petition would “raise signifi-cant constitutional questions” about other long-standing drug approval programs at the FDA, including the Hatch-waxman program for conventional generic drugs.

remote study-Monitoring May Boost drugmaker ProfitBy BRIAn RyE, SEnIOR HEALTHCARE AnALyST wITH BLOOMBERG GOVERnMEnT

Pharmaceutical companies looking to curtail the rising costs of drug devel-opment may be able to consider the remote collection of clinical trial data as the FDA recently began clearing the way for telemonitoring of studies.

In December 2012, the FDA cleared a mid-stage study being conducted by a closely held biotech company -- transparency life sciences -- that includes replacing “patient site visits with telemonitoring and other measure-ments obtained from patients’ homes.” The company is partnering with aMc health in this trial, which will evaluate the approved hypertension drug lisino-

r&d Model of costs to successfully discover and develop one new Molecular entity

TARGET-TO-HIT HIT-TO-lEAD lEAD OPTIMIzATION PREClINICAl PHASE I PHASE II PHASE III SuBMISSION

TO lAuNCH lAuNCH

Probability of technical success 80% 75% 85% 69% 54% 34% 70% 91%

WIP needed for 1 launch 24.3 19.4 14.6 12.4 8.6 4.6 1.6 1.1 1

Cost per WIP per Phase $1 $2.50 $10 $5 $15 $40 $150 $40

Cycle time (years) 10 1.5 2 1 1.5 2.5 2.5 1.5

Cost per launch (out of pocket) $24 $49 $146 $62 $128 $185 $235 $44 $873

% Total cost per NME 3% 6% 17% 7% 15% 21% 27% 5%

Cost of Capital 11%

Cost per launch (capitalized) $94 $166 $414 150% $273 $319 $314 48% $1,778

Dollars in millions; wIP= works in progress (scientific and clinical); This model does not include investments for exploratory discovery research, post launch expenses or over-heads (that is, salaries for employees not engaged in R&D activities but necessary to support the organization). Source: Lilly Research Laboratories (Nature, Vol 9, March 2010, page 206)


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pril for use by multiple sclerosis patients. The two entities estimate that the cost of running this trial will be about $1.5 million, versus $5 million to $10 million for a similar study involving traditional data collection methods.

This study is one of the first to use remote monitoring following the FDA’s release of updated draft guidance on clinical trial oversight in August 2011. The agency suggested in that document that the evaluation of patients “at a location other than the site(s) at which the clinical investigation is being conducted … should be used to the extent appropriate and feasible.”

Remote data collection and patient monitoring may reduce the time and costs of conducting trials, which have both risen in recent decades. A study from the In-noThink Center for Research in Biomedi-cal Innovation concluded that, including all the money spent on projects that fail to win approval pharmaceutical companies may face costs that exceed $4 billion per new approved medicine.

A 2010 eli lilly analysis published in the journal nature estimated that companies spend an average of $40 million support-

ing pre-launch activities over an 18-month period leading to an FDA approval deci-sion (see table Page 4).

Patents protecting a drug’s intellectual property are usually issued while a drug is undergoing a trial. A faster development timeline may give companies a longer revenue-generating period following drug approval.

However, the Center for Information and Study on Clinical Research Participation notes that only six percent of clinical tri-als are completed on time. A Bloomberg Government analysis estimated that a delay of even one month in getting a drug to market could mean millions of dollars in additional pre-launch expenses and forgone revenue. One of the bottlenecks in the drug development process is patient recruitment. An Industry Standard Re-search report noted that about 70 percent of all clinical trials face delays due to patient enrollment difficulties.

Patients who live outside major cities often choose not to participate in drug trials because of the burden of traveling long distances during the study. Many of these patients are elderly and almost all of them suffer from a medical condition,

making it difficult to travel to an academic medical center or some other big-city location on multiple occasions during the course of a trial. A study from the ECRI Institute revealed that, among persons who elect not to participate in a clinical trial despite being eligible, about a quarter cite inconvenience.

Removing the travel barrier through at-home monitoring could increase the rate of patient accrual, reducing the time and costs to complete FDA-mandated studies.

The degree to which remote monitoring may be used depends on the disease being targeted, among other factors. For example, it is much easier to collect blood-pressure data remotely, as AMC Health is doing in its study, than to re-motely measure changes in the size and scope of a cancerous pancreatic tumor.

Still, facing rising costs, a ticking patent clock and deficit-cutting measures that are likely to target them, pharmaceutical com-panies have powerful incentives to speed up the process of developing new drugs. The industry will likely pay close attention to the AMC/Transparency Life Sciences study, the quality of the data collected, and the FDA’s response.

BloomBerg insight...

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THE WEEK IN REvIEW

regulatoryBayer ag and onyx Pharmaceuti-

cals inc. won expanded u.S. regulatory approval for Stivarga for patients whose gastrointestinal stromal tumors have pro-gressed after trying standard therapies.

– Ryan Flinn

dynavax technologies corp. failed to gain FDA approval for its hepatitis B vac-cine. The agency asked for more infor-mation about the safety of the product, called Heplisav. FDA staff determined in november that the vaccine worked as well with fewer doses as glaxosmithKline Plc’s Engerix-B, though a panel of agency advisers later raised concern about the potential of the product to cause rare autoimmune diseases.

– Anna Edney

cytori said Eu regulators granted a CE Mark for its Intravase reagent to give stem cells and regenerative cells to patients via intravascular delivery.

– Catherine Larkin

Furiex Pharma said avarofloxacin was granted Qualified Infectious Disease Prod-uct (QIDP) and fast track designations from the FDA.

– Sasha Damouni

amarin submitted a supplemental new drug application with the FDA for Vascepa for the treatment of patients with high triglycerides with mixed dyslipidemia.

– Sheela Sharma

Medicinova’s Mn-166 (ibudilast) got FDA fast track designation for the treat-ment of methamphetamine dependence.

– Jeremy R. Cooke

u.S. regulators halted amgen inc.’s pediatric clinical trials of the kidney drug Sensipar after a 14-year-old patient died. Sensipar was being tested for effective-ness and safety in children younger than 18 years old. The FDA said it hasn’t con-cluded whether Sensipar had a role in the death and will make recommendations when its review is complete.

– Anna Edney

shionogi & co. won u.S. approval Osphena for post-menopausal women

whose thinning vaginal tissues lead to dyspareunia, or painful intercourse.

– Anna Edney

cancer genetics got CLIA and new york State approvals for the clinical use of its mature B-cell neoplasm array (MatBA) for diffuse large B-cell lymphoma.

– Jeremy R. Cooke

anika therapeutics withdrew its EMA application for Hyalograft C autograft, which was intended to be used for the surgical repair of symptomatic cartilage defects of the femoral condyle (medial, lateral) or trochlea, caused by acute or repetitive trauma in adults.

– Sheela Sharma

The FDA told Zogenix that it is unlikely to get a decision on zohydro by the Prescrip-tion Drug user Fee Act goal date of March 1.

– Louisa Fahy

antares Pharma said the FDA accepted its nDA for Otrexup, a potential new product for the subcutaneous delivery of methotrexate using its Medi-Jet technol-ogy. The PDuFA data is Oct. 14

– Brian Lysaght

Baxter submitted a biologics license application supplement for Feiba nF to prevent bleeding episodes in patients with hemophilia A or B and inhibitors.


dainippon’s sunovion said the FDA accepted the resubmitted application for Stedesa (eslicarbazepine acetate) as an add-on therapy to treat partial-onset seizures in adults with epilepsy.


Pernix therapeutics received FDA ap-proval for its Vituz Oral Solution for the relief of cough and symptoms associated with up-per respiratory allergies or a common cold in adults 18 years of age and older.

– Sasha Damouni

anacor Pharmaceuticals is on track to file a nDA for tavaborole to treat onycho-mycosis mid-2013.

– Andrew Cinko

novartis received Eu approval for Ilaris in patients suffering acute gouty arthritis

attacks who cannot gain relief from cur-rent treatments.

– Cormac Mullen

otsuka holdings co. and h. lund-beck a/s won approval from u.S. regula-tors to market Abilify Maintena, a new formulation of the mood-stabilizing drug Abilify as a once- monthly injection to treat schizophrenia.

– Anna Edney

The FDA asked surgeons at key hos-pitals to list the complications they may have seen with intuitive surgical inc.’s da Vinci systems. The doctors were also surveyed on which surgeries the robots might be most and least suited for, and asked to discuss their training, accord-ing to copies of the survey obtained by Bloomberg news.

– Robert Langreth

clinicaldurata therapeutics’ dalbavancin was

non-inferior to vancomycin in the Phase III Discovery 2 study in acute bacterial skin and skin structure infections, according to preliminary top-line data. The company is on track to submit its nDA with the FDA mid-year and a MAA with the EMA at the end of the year.


celgene’s apremilast helped 33.1 percent of psoriasis patients reduce symptoms by at least 75 percent versus 5.3 percent of patients on placebo in the Phase III Esteem 1 trial.

– Meg Tirrell and Catherine Larkin

Merck Kgaa’s cilengitide failed to significantly increase survival in patients with newly diagnosed glioblastoma when added to standard chemotherapy.

– Phil Serafino and Allison Connolly

Januvia and Byetta, diabetes drugs sold by Merck & co. and Bristol-Myers squibb co. respectively, may double a user’s risk of developing pancreatitis, an inflammation of the pancreas linked to cancer and kidney failure, an analysis of insurance records showed.

– Shannon Pettypiece

FDA Delays zogenix Ruling, Durata Succeeds in Discovery 2, Mylan Buys Generic Injectable


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week in review...

impax labs’ IPX159 didn’t achieve statistical criteria for primary efficacy endpoints versus placebo in a Phase IIb study in restless-leg syndrome.


An intravenous solution of colloid and crystalloid fluids made by Fresenius se and B. Braun holding gmbh that’s used to stabilize patients with low blood pressure caused by conditions includ-ing dehydration or blood loss, shock and organ damage from blood infections has a 10 percent higher risk of death than saline-based crystalloid fluids, an analysis by u.K. researchers found.

– Andrea Gerlin

astraZeneca said high-level results from Kodiac-08, an open-label, random-ized, 52-week, long-term safety trial of naloxegol versus usual care in patients with non-cancer related pain and opioid-induced constipation (OIC) supports earlier Phase III studies. The nDA filing in the u.S. and Marketing Authorisation Application filing in the Eu are planned for the third quarter.

– Sheela Sharma

glaxosmithKline Plc’s Pandemrix swine-flu vaccine was associated with an increased risk of narcolepsy in u.K. children for the first time in a study that supports similar findings in Finland and Sweden, scientists at the u.K. Health Protection Agency found.

– Makiko Kitamura

Merck & co.’s cholesterol therapy Tredap-tive, which the company stopped selling this year because it was ineffective and possibly harmful, raised rates of muscle pain and weakness in patients, a study found.

– Drew Armstrong

Palatin labs’ bremelanotide, a female sex drug, significantly increased arousal, desire and the number of sexually satisfying events and decreased associated distress in premenopausal women with female sexual dysfunction in a Phase IIb trial.


deals/licensingrP Management llc, an investor in

royalty streams from pharmaceuticals, offered to buy elan corp. for about $6.5 billion. A sale of Elan would allow share-holders to avoid the substantial risks of the company’s plan to make purchases with the $3.25 billion it will receive from selling its stake in the Tysabri multiple-sclerosis drug to Biogen idec inc., the firm, known as Royalty Pharma, said.

– Allison Connolly

Quest diagnostics will sell its He-moCue Business to radiometer.

– Khalid Qayum

tPg will buy assisted living con-cepts. Assisted Living’s Class A share-holders will get $12 per share and Class B shareholders will get $12.90 per share.

– Laura Kaster

Mylan inc. agreed to buy the inject-able medicine unit of India’s strides arcolab ltd. for $1.6 billion.

– Drew Armstrong

Jazz Pharma and concert Pharma formed a license agreement that pro-vides Jazz worldwide rights to develop and commercialize Concert’s deuterium-modified sodium oxybate (D-SXB) compounds, including C-10323.

– Sasha Damouni

The joint venture between Mediwatch and genesis Medical dissolved after the companies failed to agree on a num-ber of commercial aspects.

– Sheela Sharma

litigation/PatentsJohnson & Johnson’s DePuy Syn-

thes Products unit sued Spinal Kinet-ics over its M6 intervertebral implants patents.

– Catherine Larkin and Rachel Layne

lupin ltd. lost its u.S. appeals court bid to prevent Mylan inc. from selling a generic version of the drug Antara, used to treat high cholesterol levels.

– Susan Decker

Managementendo health solutions inc. named

Rajiv De Silva as the company’s new chief executive officer.

— Drew Armstrong

humana’s CFO James Bloem will retire at year-end. The company will look at internal and external candidates.

– Brad Skillman

optimer Pharmaceuticals inc. said Chief Executive Officer Pedro Lichtinger resigned and announced it will consider “strategic alternatives” for the company.

– Alex Nussbaum and Sasha Damouni

dynavax technologies’ CFO Chris-tine R. Larson departed. Jennifer Lew, principal accounting officer, took over her responsibilities.

– Brad Skillman

Pricing/reimbursementarena said Belviq will cost $199.50 for

60 10mg pills, according to the whole-sale acquisition cost disclosed by eisai.


The u.K.’s nICE recommended Bristol-Myers and Pfizer’s Eliquis (apixaban) as an option for prevention of stroke and systemic embolism in some people with non-valvular atrial fibrillation.

– Sheela Sharma

strategyramsay health care ltd. may pay as

much as A$1 billion ($1 billion) for an acquisition to expand its geographical reach, its CEO said.

– Natasha Khan

hikma Pharmaceuticals Plc is con-sidering a possible sale of its injectable-medicines business after receiving unsolicited expressions of interest.

– Makiko Kitamura

COMPARE LOAN YIELDS FROM YOUR SCRAPED MESSAGES


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

arena and eisai’s decision to price obesity drug Belviq at a premium to com-petitor vivus may create a hurdle for the companies without broad coverage from insurers.

Eisai disclosed that the wholesale acquisition cost of Belviq has been set at $199.50 for a bottle of 60 10mg tablets, or a one-month supply. This compares to Vi-vus’s Qsymia, which retails for $160 for a month of medium-dose therapy and $220 a month for high-dose therapy.

Out-of-pocket costs for patients remain a hurdle for uptake of weight manage-ment drugs. The commercial success of both of these drugs will likely require broader insurance coverage and lower co-payments. Vivus is working to improve reimbursement of Qsymia and is trying to increase retail awareness ahead of Arena’s launch of Belviq.

Belviq gained FDA approval in June last year as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management. The agency recommended it for scheduling by the Drug Enforcement Administration (DEA). The companies will launch the drug in the u.S. once scheduling is complete. Eisai will be responsible for marketing and distribution of the drug.

Vivus’ Qsymia also gained FDA ap-proval last year on July 17. The company began marketing the drug in September. Prescriptions for Qsymia are lower than analysts had originally projected.

Qsymia prescriptions declined 16 per-cent in the week ending Feb. 15, accord-ing to data from Symphony Health. Pre-scriptions of phentermine, a generic drug that is also indicated for short-term weight management, were mostly unchanged over the same week.

Phentermine accounts for 87 percent of prescriptions in this class, compared with about 2 percent for Qsymia, according to

data from Symphony Health. During the week ending Feb. 15, close to

46 percent of Qsymia prescriptions were for the lowest or medium dose, according to Symphony Health data.

In late november, Vivus initiated a program that provides individuals with an introductory dose at no cost for patients and no revenue for Vivus.

This marketing effort, called the “Get Started! Program,” allows anyone who has a written prescription for the drug dated on or after nov. 16 to receive their first two weeks of treatment free. Qsymia is given at a starting dose of 3.75 mg/23 mg for 14 days and a recommended dose of 7.5 mg/46 mg for 30 days. Vivus has not disclosed utilization figures for the program.

The average co-pay for Qsymia is $60. This may decrease as more plans cover the drug at more favorable rates. Late last year, the company announced that Qsymia was added as a standard

benefit option to Express Scripts’ national formulary in a tier-3 position with a prior authorization. under the Express Scripts plan, participating patients pay $50 to $60 co-pay for a monthly prescription.

Vivus is also waiting to hear from the FDA regarding its amendment to the Risk Evaluation and Mitigation Strategy (REMS) for Qsymia. The proposed REMS modification would allow dispensing through a broader range of certified phar-macies, specifically select retail pharma-cies, to increase access while meeting all requirements of the REMS. The drug is currently available through mail order.

Arena has said that Eisai has 50 reimbursement specialists in addition to approximately 200 sales people that are going to be working on Belviq as primary coverage. The company also has three economists working in this particular area.

Compiled by Andrew Berens, MD, Senior Healthcare Analyst, Bloomberg Industries

and Elizabeth Krutoholow

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KEy CATAlySTS

Price Premium May Pose Hurdles for Arena, Eisai’s Belviq Similar to vivus’s Qsymia

BRIEF For the full list of titles visit www.bloombergbriefs.com or BRIEF <GO> on your Bloomberg terminal

Bloomberg Brief publishes 18 groundbreaking daily and weekly newsletters.


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

THEMES & DRIvERS:PHARMA EARNINGS By SAM FAzELI, BLOOMBERG InDuSTRIES

Bristol reported $2.5 billion in sales for Plavix in 2012 down from $7.1 billion in 2011. The company expects to bring in $259 million in sales from the drug this year.

An analysis by Bloomberg Industries suggests that price cuts in Europe may have led to a loss of as much as $4.2 billion in 2012 drug sales. This analysis excluded J&J, which did not split out European sales in earnings and ab-bott, which does not report sales figures broken down from drugs alone. Most pharmaceutical companies reported a mid-single digit decline in Eu sales.

roche reported a 2 percent drop in European sales, as its specialty portfolio offered some resilience to price cuts. Eu austerity is likely to continue to hamper sales in 2013.

Consensus EPS forecasts for the u.S. and European pharmaceutical industry have been cut by a median of 1 percent since the start of the year as many com-panies have warned of continued pricing pressure in Europe.

Large pharmaceutical sales declined $26 billion in 2012 because of patent expirations. Prescription drug sales for large pharmaceutical companies fell 9.3 percent year over year (yoy) in 2012, converted into u.S. dollars for compara-bility.

Bristol-Myers squibb lost 17.1 per-cent in drug sales due to the expiration of the patent for Plavix. astraZeneca, whose patent on Seroquel expired, lost 15.4 percent in sales last year. Exclud-ing the effect of generics, Bristol actually had the highest sales growth among peers right behind Abbott (now abbvie) and novo nordisk, which had no loss of patents last year. Astrazeneca still reported a decline of 7 percent in under-lying sales growth.

novo nordisk reported the largest in-crease in drug sales, with a 17.6 percent gain yoy. Growth was mainly due to its Victoza franchise, which has benefited from the worsening diabetes epidemic.

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Source: Bloomberg Industries

Astrazeneca expects a mid-to-high single digit percentage decline in revenue for 2013, and withdrew its previous planning assumptions on revenue and margins for fiscal 2010 to fiscal 2014.

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Growth (YoY Ex-Generic) FY12 Total Sales (Ex-Generic)Source: Bloomberg Industries

estimated impact of Price cuts in europe on large Pharma salesCOMPANy lCl Eu SAlES Fy12 Eu SAlES Fy11 Eu PRICE IMPACT % lCl uSDPfizer USD 12,010 14,737 -5% 737 737BMS USD 3,706 3,879 -3% 116 116Roche CHF 7,926 8,221 -2% 164 175Glaxo GBP 5,001 5,767 -7% 400 634Novo Nordisk DKK 18,707 19,168 -7% 1261* 236AstraZeneca USD 6,486 8,501 -5% 425** 425

*Based on 1.9% price impact in developed markets; **Based on average % impact for peer group values calculated by BI in redSources: Bloomberg Industries, Company Filings Visit {nsn miKFnu6s972d<go>} For additional comPanies


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

ClINICAl CATAlySTS

COMPANy DRuG DATE INDICATION & ACTION

SHORT INTEREST

1M % CHANGE

Buy/HOlD/SEll

Oxford BioMedica TroVax 3Q12 Ovarian Cancer: Initiate Phase II trial N/A 0/1/0

Biogen Tysabri 3Q12 Multiple Sclerosis: Final data from STRATIFY 1 trial to define prevalence of serum JC virus antibody -7.47 17/13/0

ShireHGT-2310 intra-thecal delivery

program4Q12 Hunter Syndrome: Data from Phase I/II trial N/A 19/3/0

Curis CUDC-101 4Q12 Head and neck cancer: Complete dose escalation portion of Phase I trial of IV formulation in combination with cisplatin and radiation in first-line HPV-negative patients -4.41 9/1/0

Astex Pharma AT13387 4Q12 Gastrointestinal stromal tumors (GIST): Data from Phase II trial in combination with imatinib in refractory patients -1.42 2/0/0

Xenoport Arbaclofen placarbil 4Q12 Spasticity in multiple sclerosis: Complete enrollment of Phase III trial -2.10 6/4/1

Acorda Therapeutics Ampyra Late 2012 Cerebral palsy and chronic stroke: Data from proof-of-concept trial assessing impact on ambulation and spasticity symptoms -5.10 7/6/0

Merck KGaA cilengitide Late 2012/2013

Head and neck cancer: Data from Phase I/II ADVANTAGE trial in squamous cell carcinoma of the head and neck N/A 4/18/11

h. lundbeck/Ligand Pharma carbamazepine IV Late 2012/

Early 2013 Epilepsy: Data from Phase III trial N/A 8/7/5

Allergan bimatoprost formu-lation

End of 2012 Hypotrichosis: Data from two Phase II trials in treatment of hypotrichosis of the scalp hair 24.06 23/7/0

ViroPharma maribavir End of 2012

Cytomegalovirus infection: Data from Phase II trial Study 203 in treatment of transplant pa-tients with asymptomatic cytomegalovirus infections 1.20 10/5/0

Synta ganetespib End of 2012

Lung cancer: Preliminary data from Phase II CHIARA trial of monotherapy in ALK+ non-small cell lung cancer patients not previously treated with a direct ALK inhibitor such as crizotinib 12.69 5/2/1

Vical Allovectin Late 2012 Melanoma: Data (including overall survival) from Phase III trial in first-line metastatic patients 3.55 5/2/0

Vertex VX-765 2H12/2013 Epilepsy: Data from Phase IIb trial in treatment-resistant epilepsy for a treatment period longer than six weeks 7.66 19/7/1

Lux Biosciences/ iso-technika Pharma Luveniq Early

1Q13Non-infectious uveitis: Data from additional pivotal Phase III trial in non-infectious uveitis in response to the complete response letter from FDA and to support re-filing of MAA N/A N/A

Boehringer Ingelheim Pradaxa (dabiga-tran etexilate) Feb. 2013 Mechanical heart valve prophylaxis: Data from Phase II RE-ALIGN trial in patients with

mechanical heart valves N/A N/A

Osiris Therapeutics Prochymal (remestemcel-L) Early 2013 Type I diabetes: Final data from Phase II trial in newly diagnosed patients -2.81 0/1/3

cell therapeutics/ Chroma Therapeutics tosedostat Early 2013 Leukemia: Data from investigator-sponsored Phase I/II trial in first-line acute myeloid leukemia

(AML) in elderly patients 18.99 1/0/0

ZIOPHARM Oncology Zymafos 1Q12 Front-line metastatic soft tissue sarcoma: Data from Phase III registration PICASSO III trial in combination with doxorubicin 6.38 4/3/1

Roche RG7652 (anti-PCSK9) Early 2013 Lipid disorders: Data from Phase II EQUATOR trial in hypercholesterolemia #N/A N/A 22/12/0

ImmunoCellular ICT-107 Early 2013 Glioblastoma multiforme: Interim safety analysis of Phase IIb trial in newly diagnosed patients 34.17 4/0/0

Lexicon Pharma LX1033 1Q13 Diarrhea-predominant irritable bowel syndrome: Data from Phase II trial -10.12 5/2/1

XenoPort XP23829 Mar 16-23 2013 Multiple sclerosis: Present data from Phase I single-dose trialat AAN -2.10 6/4/1

ISIS Pharma ISIS-ApoCIII Early 2013 Severe hypertriglyceridemia: Data from Phase II proof-of-concept trial 1.62 4/4/2

ISIS Pharma ISIS-CRP Early 2013 Rheumatoid arthritis: Data from Phase II trial 1.62 4/4/2

Percent change in the total number of shares investors have sold short but have not bought back for the last month API: current value availableBolded company used for Short Interest and RatingPast dates indicate data had been expected but is not yet available


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

IPO TRACKER

iPo QueueISSuER NAME ISSuER TICKER OFFER SIzE (M)Quintiles Transnational Holdin 0522827D US 600OncoMed Pharmaceuticals Inc OMED US 115Paratek Pharmaceuticals Inc PRTK US 92Newsummit Biopharma Holdings L NSB US 80Enanta Pharmaceuticals Inc ENTA US 69Ambit Biosciences Corp. AMBI US 57.5Audeo Oncology Inc AURX US 52OvaScience Inc OVSC US 42Alcobra Ltd ADHD US 17.25

healthcare iPos 2013 Performance to date

ISSuER NAME ISSuER TICKER

OFFER SIzE (M)

OFFER PRICE

lAST ClOSE

OFFER TO

DATEZoetis Inc ZTS US 2574.39 26.00 32.07 23.35KaloBios Pharmaceuticals Inc KBIO US 70.00 8.00 7.06 -11.75Stemline Therapeutics Inc STML US 38.15 10.00 12.49 24.90Medrx Co Ltd 4586 JP 26.57 1000.00 2693.00 174.00Sarana Meditama Metropolitan T SAME IJ 7.47 400.00 1300.00 217.50Medica Pro Familia SA MED PW 0.39 10.00 13.60 36.00

top Financial advisors: healthcare iPos 2013

RANK uNDERWRITER MKT SHARE(%)

AMOuNT uSD

(MlN)

FEES (%) ISSuES

1 Deutsche Bank AG 9.5 257.44 3.7 1

2 Barclays 9.5 257.44 3.7 1

3 Citi 9.5 257.44 3.7 1

4 Bank of America Merrill Lynch 9.5 257.44 3.7 1

5 JP Morgan 9.5 257.44 3.7 1

6 Guggenheim Partners 9.5 257.44 3.7 1

7 Goldman Sachs & Co 9.5 257.44 3.7 1

8 Jefferies Group Inc 9.5 257.44 3.7 1

9 Credit Suisse 9.5 257.44 3.7 1

10 Morgan Stanley 9.5 257.44 3.7 1

11 Aegis Capital Corp 1.4 38.15 7 1

12 William Blair & Co LLC 1.3 35 7 1

13 Leerink Swann LLC 1.3 35 7 1

14 Nomura Holdings Inc 0.9 25.12 8 1

15 Lautandhana Securindo PT 0.3 7.46 3.78 1

initial Public offerings calendarDATE EvENT COMPANy OFFER SIzE (uSD M)

11-Mar Lock-up expiring UMN Pharma Inc. 50.44

29-Mar Lock-up expiring DBV Technologies SA 53.10

Market leading intelligence Bloomberg Briefs publishes 18 newsletters to help you stay ahead of the markets. Individual and group subscriptions available.

Visit www.bloombergbriefs.com to subscribe or take a trial.Or call Annie Gustavson at +1-212-617-0544.

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Postponed iPos 2013ISSuER NAME ISSuER TICKER OFFER SIzE (M)Cancer Genetics Inc CGIX US 30


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

SHORT INTEREST TRACKER This tracker looks at short interest as a percentage of shares outstanding among companies with upcoming PDuFA dates.

COMPANy TICKER DRuG INDICATION TIMING SHORT INTEREST

DAyS TO COvER

1M CHANGE

Pharmaxis PXS AU Bronchitol Cystic fibrosis Mar. 18 3.90 7.24 N/A

A.P. Pharma APPA US APF530 Prevention of acute-and delayed-onset chemotherapy-induced nausea and vomiting Mar. 27 0.25 0.60 34.38

Biogen Idec BIIB US BG-12 Relapsing remitting multiple sclerosis Mar. 27 0.21 0.32 22.87

Astellas 4503 JP Mycamine Pediatric candidemia Mar. 27 0.61 1.43 N/A

Intercell ICLL AV Ixiaro Pediatric label extension of Japanese encephalitis vaccine for children traveling to endemic areas Early 2013 1.74 10.88 N/A

Johnson & Johnson JNJ US canagliflozin Type II diabetes Mar. 31 2.55 7.48 -0.45

United Therapeutics UTHR US oral treprostinil Pulmonary arterial hypertension Mar. 31 4.36 3.97 -13.03

Allergan AGN US Levadex Acute treatment of migraine in adults Apr. 15 0.70 1.21 82.84

Sucampo SCMP US AMITIZA Opioid-induced constipation in patients with chronic, non-cancer pain Apr. 26 0.79 3.64 -6.63

Gilead Sciences GILD US elvitegravir Treatment-experienced HIV patients Apr. 27 5.53 10.92 14.77

Gilead Sciences GILD US cobicistat HIV Apr. 28 5.53 10.92 14.77

Shire SHP LN Vyvanse Maintenance treatment of children and adolescents aged 6 to 17 years with attention deficit hyperactivity disorder Apr. 29 0.30 1.14 N/A

Raptor Pharma RPTP US RP103 Nephropathic cystinosis Apr. 30 14.09 18.61 4.88

Navidea Biopharma NAVB US Lymphoseek Lymphatic mapping and lymphoscintigraphy to help stage breast cancer and melanoma Apr. 30 8.83 9.75 9.46

Theravance THRX US Relvar Chronic obstructive pulmonary disease May 12 10.22 9.61 22.36

Valeant Pharma VRX US IDP- 108 Mild to moderate onychomycosis of the toenail May 26 0.19 0.49 -7.00

Depomed DEPO US Serada Non-hormonal treatment of moderate to severe vasomotor symptoms due to menopause May 31 1.81 2.68 -2.63

Celgene CELG US Revlimid Relapsed/refractory mantle cell lymphoma Jun. 5 0.32 0.35 -8.88

Hisamitsu Pharma (Noven) 4530 JP LDMP Vasomotor symptoms of menopause Jun. 28 1.59 9.11 N/A

Incyte INCY US Jakafi New dosing in myelofibrosis patients with low platelets (below 100,000) June 22.59 15.52 19.09

Regeneron REGN US Ilaris Systemic onset juvenile idiopathic arthritis June 3.93 4.43 -10.51

Theravance THRX US Vibativ Nosocomial pneumonia and reintroduction into US market 1H 2013 10.22 9.61 22.36

Novo Nordisk NOVOB DC catridecacog Factor XIII congenital deficiency 1H/July 2013 0.53 2.73 N/A

Baxter BAX US BAX-326 On-demand treatment and prophylaxis of hemophilia B Jul. 4 0.24 0.45 -36.15

Forest Lab FRX US levomilnacipran Major depressive disorder Jul. 27 0.16 0.22 -4.77

AVEO AVEO US tivozanib Advanced renal cell carcinoma Jul. 28 7.59 4.25 8.81

Allergan AGN US Botox Crow's feet lines Aug.-Oct. 0.70 1.21 82.84

Algeta ALGETA NO Alpharadin Castration-resistant prostate cancer patients with bone metastases

Second half of Aug. 3.60 11.87 N/A

Biogen Idec BIIB US Tysabri Expanded indication to include first-line use in patients with relapsing multiple sclerosis who have tested negative for antibodies to JC virus

Early Sept. 0.21 0.32 22.87

Swedish Orphan Biovitrum SOBI SS Factor IX Fc Hemophilia B, assuming priority review Sept. 4 0.06 0.35 N/A

Source: Bloomberg Industries, Markit


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Q: What are the key concerns of hos-pitals you are working with to maintain tax-exempt status?a: They are concerned with being in compli-ance with the new Internal Revenue Code rules for tax-exempt hospitals. The new law is extremely complex and the proposed regulations are very specific as to the steps that must be taken in order to comply. If an organization is not in compliance with the law, and as a result loses its tax exemption, it would be a disaster. If a hospital loses its tax-exempt status, the hospital would lose its ability to receive tax deductible contribu-tions and there would most likely be an adverse impact on tax-exempt bonds.

Q: how many hospitals will be re-viewed by irs this year?a: Every hospital will be reviewed every three years for compliance with the Com-munity Health needs Assessment. There are over 3,000 tax-exempt hospitals, so I would surmise that about 1,000 with be reviewed each year. I understand that approximately 1,700 reviews have already been completed.

Q: What are the most important chang-es for hospitals this year with regard to tax exemption?a: The new law has four requirements and three were effective for tax years starting after March 23, 2010. The effec-tive date for the Community Health needs Assessment is for tax years beginning after March 23, 2012, which means that for many hospitals this will be the first year in which they will have to be in compli-ance with the Community Health needs Assessment requirement.

Q: What does it entail?a: First, a hospital must define its commu-nity. The next step is to identify the health-care needs in the community. The legisla-tion says organizations must base this on current information, take into account the broad interests of the community and in-put from people who are knowledgeable about public health issues in the commu-nity, for example the public health depart-ment. Once the needs of the community are identified, the question is how do you address those needs? Hospitals have to come up with implementation strategies and also must indicate the reasons why there are some needs that they may not be addressing, which could include lack of financial or human resources.

Q: how will the irs’ read of unrelated business income change this year? What should hospitals do to prepare?a: Even though these reviews of tax-exempt hospitals are not supposed to be audits, the IRS will be looking at Forms 990, 990-T, financial statements and other public information. One area of special IRS focus besides the Community Health needs Assessment is the unrelated busi-ness income tax. Some area hospitals are vulnerable. For example, Section 512(b)(13) of the Code says if a tax-exempt organization controls a taxable subsidiary, which is defined as having more than 50 percent interest in it, and if that subsidiary pays the tax-exempt organization rent, royalties, interest or annuities, these pay-ments will be unrelated business income to the tax-exempt organization. An excep-tion to this rule came into the law in 2006 and says that if organization had a binding written contract with the subsidiary before Aug. 17, 2006 and the consideration was

at fair market value, it would not be unre-lated business income. The IRS will look at all payments from subsidiaries to see if this is being counted or if all the elements of the exception are met. Also, the IRS is looking at organizations with substantial gross unrelated business income but no net taxable unrelated business income. There are concerns that these organiza-tions are not reporting income correctly or are using more expenses to offset income than is proper.

Q: the irs is looking at governance and compensation practices of exempt organizations. What is the likely impact on hospitals?a: IRS agents found a high correlation between tax compliance and those that looked at comparability data when setting compensation. The IRS is now looking at compensation and looking for a process to see that the organization is looking at comparability data to make sure that influential people do not get paid exces-sive amounts. where these individuals do get paid excessive amounts they could be subject to penalty taxes. If an organization goes through process they can establish the rebuttable presumption of reasonable-ness so that the taxes probably will not ap-ply. If the organization establishes a rebut-table presumption, it shifts burden to IRS to show that compensation is unreason-able. There must be independent persons and they have to base their determination on comparability data and document how the decision was made. If it varies from what the data shows, they must explain why they made that variation.

this interView has Been edited and condensed a Full Version is aVailaBle

at {nsn mJ54rV6VdKhV <go>}

Q & A

laura Kalick, director of nonprofit tax consulting, Bdo said many hospitals will need to be compliant with the Community Health needs Assessment requirement for the first time this year in an interview with Bloomberg Brief: Healthcare Finance’s Elizabeth Krutoholow. new IRS rules for tax-exempt hospitals are complex, she said. Hos-pitals will also be vulnerable to the unrelated business income tax this year, which will be a special focus of the IRS.

laura Kalick of BDO on the Community Health Needs Assessment for Tax-Exempt Hospitals

Education: Georgetown University Law Center, LLM, Taxation; The George

Washington University Law School, JD, Law; University of Michigan, BA

Hometown: I grew up outside of Pittsburgh

Favorite Restaurant: 2 Amys in Washington DC

Hobby: I like to paint


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

AMGEN INC amgn us 69,290 92.58 6.79% 12.87 11.28 9.57 8.68GILEAD SCIENCES gild us 66,148 43.45 16.32% 21.49 15.58 15.21 11.11CELGENE CORP celg us 44,228 105.62 31.60% 18.69 15.51 13.89 12.14BIOGEN IDEC INC biib us 39,866 168.70 13.64% 21.71 17.58 13.52 10.48ROCHE HLDG-GENUS rog vx 185,547 215.00 16.68% 14.41 13.46 9.98 9.51NOVO NORDISK-B novob dc 564,480 1008.00 8.84% 21.86 19.72 15.97 14.41MERCK KGAA mrk gy 23,761 109.75 8.18% 14.48 13.15 9.38 8.40UCB SA ucb bb 8,368 45.64 2.38% 23.92 18.68 14.18 12.06IPSEN ipn fp 2,210 26.24 16.42% 14.26 12.52 8.65 7.68ALEXION PHARM alxn us 16,938 86.77 -7.47% 29.98 26.06 24.65 18.04BIOMARIN PHARMAC bmrn us 7,517 59.61 17.83% N/A N/A N/A N/AUNITED THERAPEUT uthr us 3,052 60.81 11.96% 7.19 6.51 5.27 4.87ONYX PHARM onxx us 5,406 75.25 -0.29% N/A N/A N/A N/ASTALLERGENES genp fp 656 48.50 14.74% 17.16 16.42 8.75 8.39PDL BIOPHARMA IN pdli us 973 6.95 1.42% 4.39 3.67 N/A N/AALK-ABELLO A/S alkb dc 4,153 410.00 5.14% 44.77 24.26 15.02 10.32

JOHNSON&JOHNSON jnj us 214,401 76.70 9.44% 14.16 13.29 9.18 8.60SANOFI san ft 95,802 72.23 1.67% 12.03 10.79 7.92 7.30PFIZER INC pfe us 196,908 27.39 10.09% 12.02 11.57 7.68 7.70ROCHE HLDG-GENUS rog vx 185,547 215.00 16.68% 14.41 13.46 9.98 9.51NOVO NORDISK-B novob dc 564,480 1008.00 8.84% 21.86 19.72 15.97 14.41MERCK & CO mrk us 128,844 42.63 4.37% 11.71 11.23 7.18 7.07ELI LILLY & CO lly us 62,143 54.78 11.84% 14.06 19.59 9.28 12.34GLAXOSMITHKLINE gsk ln 71,928 1466.00 10.68% 12.64 11.47 9.07 8.64ASTRAZENECA PLC azn ln 37,601 3012.50 7.22% 8.29 8.63 5.76 5.95ABBOTT LABS abt us 52,775 33.60 8.27% 16.85 15.20 9.44 8.59ASTELLAS PHARMA 4503 jp 2,372,581 5070.00 30.84% 22.59 18.59 10.46 9.34TAKEDA PHARMACEU 4502 jp 3,861,467 4890.00 26.85% 13.87 18.43 12.12 10.76

REGENERON PHARM regn us 16,742 171.73 -2.38% 1.25 0.99 56.1 THERAVANCE thrx us 2,060 20.92 -8.77% 1.74 0.92 31.6 ALKERMES PLC alks us 2,912 21.87 17.25% -1.95 1.10 N/ADENDREON CORP dndn us 896 5.74 9.45% -0.20 1.03 39.7 ARIAD PHARM aria us 3,807 20.93 9.65% 1.86 0.85 17.9 ACORDA THERAPEUT acor us 1,221 30.40 19.67% 8.01 0.68 N/AMEDICINES COMP mdco us 1,694 31.49 32.71% 6.40 0.73 N/ANPS PHARM INC npsp us 689 7.93 -12.31% -0.87 1.10 19.4 ARIAD PHARM aria us 3,807 20.93 9.65% 1.86 0.85 17.9 SAVIENT PHARMACE svnt us 69 0.95 -10.48% -0.08 1.04 10.9 AMAG PHARMACEUTI amag us 360 16.81 12.51% 10.60 0.28 63.6 BAVARIAN NORDIC bava dc 1,344 51.50 2.41% 18.58 0.52 N/AINTERCELL AG icll av 96 1.73 -4.02% -0.27 1.14 33.7 CANGENE CORP cnj cn 207 3.10 56.76% 0.54 0.63 N/ASEATTLE GENETICS sgen us 3,412 28.33 21.45% 3.04 0.87 N/AINCYTE CORP incy us 3,007 22.46 33.84% -0.30 1.02 25.3 INTERMUNE INC itmn us 750 9.21 -8.46% 0.83 0.91 24.1 ALGETA ASA algeta 8,245 193.90 24.42% 8.67 0.94 20.5 IMMUNOGEN INC imgn us 1,294 15.37 18.98% 1.97 0.88 44.4 THROMBOGENICS NV thr bb 1,416 39.50 -3.95% 2.48 0.87 N/AEXELIXIS INC exel us 834 4.54 -0.22% 0.41 0.91 39.2 AVEO PHARMACEUTI aveo us 329 6.41 -17.14% 2.62 0.67 N/A

EV/MKT CAPMARKET CAP IN

$ MLN

LARGE PHARMA

30D CHARTCASH BURN IN

MONTHS*TICKERCOMPANY NAME LAST PRICE

YTD TOTAL RETURN

MATURE/PROFITABLE BIOTECH

COMPANY NAMEMARKET CAP IN

$ MLNLAST PRICE

YTD TOTAL RETURN

2013 P/ETICKER 2014 P/E 2013 EV/EBITDA 2014 EV/EBITDA

EARLY COMMERCIAL/DEVELOPMENTAL STAGE BIOTECH

NET CASH/ SHARE

HEAl

TH IN

DICA

TORS


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

ISIS PHARM isis us 1,559 15.31 40.76% 1.25 0.83 69.3 HALOZYME THERAPE halo us 621 5.51 -18.78% 0.61 0.91 16.8 MEDIVATION INC mdvn us 3,446 46.08 -3.95% 2.03 0.91 42.8 MORPHOSYS AG mor gr 682 29.25 -1.54% 5.81 0.67 N/ARIGEL PHARMACEUT rigl us 597 6.74 3.38% 3.47 0.56 25.9 MANNKIND CORP mnkd us 749 2.62 11.26% -0.63 1.27 0.2 PROTALIX BIOTHER plx us 529 5.66 10.21% 0.50 0.90 435.7 TRANSGENE SA tng fp 267 8.38 6.44% -0.84 1.11 2.4 ENZON PHARMACEUT enzn us 185 4.17 -4.51% 4.01 0.40 1,683.6 LEXICON PHARMACE lxrx us 1,009 1.97 -10.86% 0.53 0.59 25.6 ACTIVE BIOTECH acti ss 3,377 49.00 -10.18% -0.17 1.00 10.8 ALNYLAM PHARMACE alny us 1,469 23.74 29.81% 4.31 0.76 21.9 GERON CORP gern us 188 1.44 3.55% 1.17 0.21 19.0 LIGAND PHARM-B lgnd us 412 20.63 -0.96% -1.21 1.06 N/AGENMAB A/S gen dc 5,272 104.80 32.26% 24.25 0.36 158.9 ABLYNX NV ablx bb 360 7.48 25.64% 1.34 0.77 32.9 IMMUNOMEDICS INC immu us 187 2.29 -21.23% 0.43 0.88 N/ASANGAMO BIOSCIEN sgmo us 551 10.33 69.55% 1.60 0.44 102.6 CURIS INC cris us 246 3.08 -21.57% 0.36 0.90 N/ADYNAVAX TECHNOLO dvax us 354 1.98 -28.42% N/A 0.80 40.6 GALAPAGOS NV glpg bb 518 19.35 22.07% 1.20 0.88 N/AZEALAND PHARMA A zeal dc 1,821 78.50 -6.55% N/A N/A 386.4 CARDIOME PHARMA crme us 27 0.44 3.85% N/A 0.85 24.9 THERATECHNOLOGIE th cn 26 0.43 36.51% 0.60 0.74 20.4 NOVAVAX INC nvax us 271 1.83 -3.70% 0.15 0.88 17.5 VICAL INC vicl us 280 3.25 9.97% 0.94 0.68 N/ABIOINVENT INTL binv ss 200 2.70 -18.18% 1.35 0.59 7.0 OSIRIS THERAPEUT osir us 233 7.09 -26.73% 1.44 0.73 30.3 MAXYGEN INC maxy us 68 2.46 -0.81% 5.82 N/A N/AAFFYMAX INC affy us 100 2.68 -86.05% 2.76 0.58 40.8 MOLMED SPA mlm im 91 0.41 -3.91% 0.10 0.79 8.7 SAREPTA THERAPEU srpt us 900 29.59 13.55% 1.68 0.62 16.0 DYAX CORP dyax us 330 3.33 -7.76% -0.50 1.14 8.9 BIOCRYST PHARM bcrx us 61 1.19 -15.49% 0.26 0.90 14.3 MOLOGEN AG mgn gr 214 13.89 17.86% 0.44 0.94 41.1 ARRAY BIOPHARMA arry us 498 4.27 4.57% -0.03 1.03 16.4 CELLDEX THERAPEU cldx us 808 10.26 41.88% 0.86 0.67 20.2 REPLIGEN CORP rgen us 195 6.28 -0.80% 1.61 0.57 N/A4SC AG vsc gr 105 2.09 6.90% 0.37 0.69 11.1 PEREGRINE PHARMA pphm us 170 1.28 -1.52% 0.18 0.62 10.5 CEL-SCI CORP cvm us 81 0.26 -1.92% 0.01 0.97 7.4 OXFORD BIOMEDICA oxb ln 31 2.20 -2.17% 0.01 0.57 16.3 INOVIO PHARMACEU ino us 90 0.67 38.14% 0.22 0.49 8.4 MEDIGENE AG mdg gr 37 1.00 -0.30% 0.35 0.64 N/AXOMA CORP xoma us 228 2.79 13.13% 0.34 0.70 17.6 TOPOTARGET A/S topo dc 235 1.77 -17.21% 0.31 0.85 N/ADIAMYD MEDICAL-B diamb ss 398 13.80 35.12% N/A N/A N/AANTISOMA PLC asm ln 12 1.88 1.89% 0.02 N/A N/ACYTOS BIOTECHNOL cytn sw 82 3.67 31.80% 0.73 0.74 N/A

MEDTRONIC INC MDT US 45,744 45.23 9.61% 12.3 11.7 9.1COVIDIEN PLC COV US 30,013 63.58 10.10% 14.2 12.9 9.9ST JUDE MEDICAL STJ US 11,711 41.40 13.45% 11.2 10.5 7.8BOSTON SCIENTIFC BSX US 10,004 7.37 28.97% 17.4 15.5 8.7

LAST PRICEYTD TOTAL

RETURN2013 P/E 2014 P/E 30D CHART 2013 EV/EBITDATICKERCOMPANY NAME

MARKET CAP IN $ MLN

CARDIOVASCULAR DEVICES

MARKET CAP IN $ MLN

LAST PRICE EV/MKT CAP 30D CHARTCASH BURN IN

MONTHS*COMPANY NAME TICKER

YTD TOTAL RETURN

NET CASH/ SHARE

HEAl

TH IN

DICA

TORS


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

CR BARD INC BCR US 8,081 98.80 1.33% 15.7 12.9 9.7VOLCANO CORP VOLC US 1,157 21.47 -8.34% 244.0 50.3 26.5BIOSENSORS INTL BIG SP 2,218 1.30 7.47% 15.8 13.7 10.2VASCULAR SOLUTIO VASC US 249 15.09 -3.92% 22.3 19.1 7.5SURMODICS INC SRDX US 376 25.62 13.42% 27.9 25.8 11.5THORATEC CORP THOR US 2,033 35.29 -6.13% 19.4 17.6 10.8HEARTWARE INTERN HTWR US 1,246 85.43 1.75% N/A N/A 15.3GREATBATCH INC GB US 651 27.39 16.48% 14.3 13.3 N/ALEMAITRE VASCULA ZOLL US 91 6.02 6.27% 31.7 20.1 11.1ABIOMED INC ABMD US 617 15.99 19.35% 32.4 27.1 N/AARTHROCARE CORP ARTC US 989 35.27 0.95% 24.8 22.8 6.0CARDIONET INC BEAT US 65 2.58 9.21% N/A N/A N/A

UNITEDHEALTH GRP UNH US 54854 53.52 -1.46% 9.7 8.9 5.8WELLPOINT INC WLP US 18814 61.88 2.07% 7.9 7.5 3.0AETNA INC AET US 15580 47.50 2.36% 8.6 8.2 5.3HUMANA INC HUM US 10749 67.88 -0.54% 8.7 7.9 1.9CIGNA CORP CI US 16660 58.26 9.35% 9.2 8.4 N/ACOVENTRY HEALTH CVH US 6125 45.50 1.18% 13.7 12.8 7.3HEALTH NET INC HNT US 2080 25.59 5.93% 12.4 9.6 N/AWELLCARE HEALTH WCG US 2455 56.80 17.46% 11.7 10.1 N/ACENTENE CORP CNC US 2360 45.70 9.80% 17.2 13.0 3.3MAGELLAN HEALTH MGLN US 1422 52.66 5.22% 13.5 12.6 6.2UNIVERSAL AMERIC UAM US 749 8.49 -2.91% 13.6 12.6 4.1MOLINA HEALTHCAR MOH US 1450 32.11 17.92% N/A 14.8 N/AHEALTHWAYS INC HWAY US 427 12.57 20.09% 43.6 22.4 2.5

HCA HOLDINGS INC HCA US 16396 36.96 22.9% 11.50 9.71 7.2UNIVERSAL HLTH-B UHS US 5654 58.18 19.8% 12.93 11.39 7.5TENET HEALTHCARE THC US 4117 39.48 21.1% 13.91 11.26 6.7LIFEPOINT HOSPIT LPNT US 2070 44.09 16.8% 14.68 12.56 6.8HEALTH MGMT AS-A HMA US 2804 10.90 17.9% 11.71 10.15 6.1COMMUNITY HEALTH CYH US 3872 42.01 37.5% 11.26 9.22 6.8VANGUARD HEALTH VHS US 1174 15.15 21.4% 19.57 14.93 6.4KINDRED HEALTHCA KND US 599 11.25 4.2% 9.33 8.36 5.2

CVS CAREMARK COR CVS US 63480 51.56 6.2% 13.00 11.70 7.4EXPRESS SCRIPTS ESRX US 46949 57.36 5.4% 13.44 11.68 8.9OMNICARE INC OCR US 3913 37.40 3.2% 10.59 9.82 8.1PHARMERICA CORP PMC US 430 14.56 0.6% 10.33 9.42 6.3BIOSCRIP INC BIOS US 621 10.91 1.7% N/A 41.96 20.1MCKESSON CORP MCK US 25026 107.46 9.7% 14.88 13.43 8.6CARDINAL HEALTH CAH US 15853 46.51 12.2% 13.33 12.23 7.2AMERISOURCEBERGE ABC US 11044 47.98 9.8% 15.14 13.66 8.3HENRY SCHEIN INC HSIC US 7780 88.84 10.9% 18.24 16.49 10.7PATTERSON COS PDCO US 3960 36.45 6.2% 17.92 16.18 10.6OWENS & MINOR OMI US 1927 30.45 6.8% 16.02 14.72 7.7WALGREEN CO WAG US 39052 41.32 11.4% 12.76 11.34 7.8RITE AID CORP RAD US 1518 1.68 20.6% N/A N/A 7.1* Based on data from most recent quarterly filings Source: Bloomberg LP Market Close Mar.1, 2013

SUPPLY CHAIN MANAGEMENT

MARKET CAP IN $ MLN

LAST PRICE 30D CHART 2013 EV/EBITDA

MANAGED CARE

HOSPITALS

YTD TOTAL RETURN

2013 P/E 2014 P/ECOMPANY NAME TICKER

HEAl

TH IN

DICA

TORS
