#$nvs

Novartis AG is profitable and its stock $NVS is profitable for a longer time than 5 years.

Invest now!

An author Piotr Sienkiewicz

Not at the high, mind you, but on the way down before it went, well, waaaay down. I can’t imagine anyone who’s trading their own money professionally or semi-professionally is actually still long this stock. They can’t possibly be.

Professional traders are not in the “I want to be right” business, they’re in the capital preservation business. Either that or they face involuntary retirement. When a stock is going up, traders are happy to ride along. When it stops going up, traders get out.

For portfolio managers, it’s different.

They learn everything there is to know about the company and read all the research. They conduct their own research. They get introduced to management by the institutional sales-traders who have been turned into matchmakers and concierges in the modern era. When a stock they’ve learned about goes down, they buy even more. They stick to their guns and make some phone calls. They get the “reason” why the stock is down and decide it’s overblown. They talk to their own investors about the “opportunity” the market has created.

Both can be right on different timeframes.

The difference is, the trader doesn’t let herself get associated with a certain position or be forced to explain why her original bullishness is still justified. She sells a stock as it breaks down and, in most cases, forgets all about it. A portfolio manager who’s come out publicly with a positive opinion on that stock doesn’t have the luxury of moving on without losing face in front of investors.

“Who cares what the investors think, cut your losses!” you might be saying.

OK, sure, but not as easy in practice. Because now there is doubt in the minds of the PM’s investors and the leash gets tightened a bit. There is less latitude for future risk-taking now and maybe a couple of dollars of redemptions. The magic man has lost his touch, they’ll whisper.

Optics and career risk are a factor, even though they have nothing to do with whether or not a position should be held or sold.

Here are three small hedge funds that had massive concentrated bets in Valeant this year. They were up huge on the trade and now they’re most likely down huge, in very short order. Can they admit they were wrong and move on? Will they lose fund of funds money in the process?

Running money publicly and going on the record with investors about individual stocks is really difficult. It introduces new elements of difficulty into an already difficult game. Traders on their own, reporting to no one else, don’t have nearly as much trouble exiting a losing situation.

Yesterday, the Court of Appeals for the Federal Circuit, which is the exclusive Court of Appeals for any case involving patents, issued its first major decision interpreting the Biologics Price Control and Innovation Act (BPCIA) that regulates the legal pathway for biosimilar drugs to be brought to market. The case is between Amgen (AMGN) and Novartis’s (NVS) Sandoz division and relates to filgrastim, a drug that helps the body make white blood cells to fight infections during cancer treatments. Filgrastim is sold by Amgen under the brand name Neupogen and sought to be sold by Sandoz under the brand name Zarxio.

I don’t intend to go in to the details of the decision here, but instead wanted to quickly respond to several press articles that cited the decision as allowing Zarxio to be launched in September. The Wall Street Journal, for example, titled its story on the decision, “Novartis Can Sell Copycat of Amgen’s Neupogen in September, Court Rules”, and the AP titled its story, “Court Ruling Clears Way For Novartis' Low-Cost Biotech Drug”.

Not so fast. The court of Appeals did NOT say Zarxio could be launched in September. All it said was that Zarxio could NOT be launched before September. Those are entirely two different statements. Indeed, at this point, Amgen has several options for ways to keep Zario from launching until much later than September, and perhaps not even this year at all.

First, Amgen can go back to the district court in California and ask for a preliminary injunction baring any launch of Zarxio until the case is over. Such an injunction can be requested on the basis that Zarxio is likely to infringe any patent(s) Amgen has on filgrastim. At its heart, the dispute over biosimilars will come down to patents held by the approved product holder and whether they are valid and infringed by biosimilars. The case between Amgen and Sandoz has not yet begun to explore those issues.

Second, Amgen can ask the entire Court of Appeals to reconsider the case. This is called “requesting rehearing en banc,” and is a way to ask all twelve active judges on the Court of Appeals to decide the case (initially, all cases at the Court of Appeals are randomly assigned to a panel of only three judges). This case is a particularly good candidate for en banc review because no two judges agreed on the result. One judge disagreed with the other two on one issue while another judge disagreed with the other two on a second issue. Such broad disagreement, especially in initial cases interpreting new statutes like the BPCIA, is usually settled by an en banc decision. In conjunction with requesting en banc review, Amgen can ask that an injunction be issued blocking launch of Zarxio until that process is completed.

Third, Amgen can ask the Supreme Court to review the case (either in lieu of seeking en banc review by the Court of Appeals or after that process is completed). If it takes that step, which is trivial in cost compared to the value of the case, Amgen can ask that an injunction barring launch of Zarxio be issued until the Supreme Court decides whether to consider the case and, if it does, until it is decided.

Amgen has plenty of time to do these things between now and September so as to prevent any launch of Zarxio. In short, the rumors of Neupogen's demise at the hands of a potential Zarxio launch have been greatly exaggerated.

Pfizer, Teva and Actavis are potential consolidators, while Momenta, Coherus and Epirus lead the list of likely targets.

by Laura Cooper

Earlier this month Novartis AG's (NVS) Sandoz Biopharmaceuticals made history by winning Food and Drug Administration approval for Zarxio, the first biosimilar cleared in the United States. The decision was good news for Novartis, of course, but also for an array of smaller companies developing their own biosimilar drugs that now look like attractive acquisition targets.

Biosimilars are what they sound like: substances sort of like an approved biological product. Zarxio is similar to its reference product, Amgen Inc.'s (AMGN) Neupogen, which was licensed in 1991. It is mainly used to treat patients with myeloid leukemia and those undergoing bone marrow transplantation.

According to Hospira -- which has been distributing biosimilars in Europe for several years and which was acquired by Pfizer Inc. (PFE) in February for $17 billion -- the development of a biosimilar takes from eight to 10 years and costs between $100 million to $200 million. The development of a small-molecule generic drug takes three to five years and costs between $1 million and $5 million. Obviously, a drugmaker seeking to get into biosimilar production can do so more quickly and cheaply by simply acquiring a smaller producer already well along the development road.

Pfizer had its own biosimilar pipeline, like many of its peers in the space. But it purchased the injectable maker anyway to quickly bolster its biosimilar line. At the time of the deal, Pfizer noted that the market for biosimilars is estimated to be as much as $20 billion by 2020. Amgen and Sanofi (SNY) are also active in the space.

Sandoz received approval for Zarxio under the Biologics Price Competition and Innovation Act. The company is a market leader in biosimilars, with over 50% of the biosimilars approved in North America, Europe, Japan and Australia, according to the company. Outside of the U.S., it markets three biosimilars: somatropin, filgrastim and epoetin alfa.

Momenta Pharmaceuticals (MNTA), Coherus Biosciences Inc. (CHRS), Epirus Biopharmaceuticals (EPRS) and Russia-based Biocad are smaller companies with biosimilars in development, and all could find themselves in the crosshairs of big pharma companies.

Andrew McDonald, the CEO of LifeSci. Capital and co-portfolio manager of BioShares Funds, which invests in the sector including in biosimilars, said that a consolidation movement would being driven by the fact that there are going to be fewer generic products. Drug companies will need biologic capabilities. "Everyone knows biosimilars are the future," McDonald said in an interview. "Biologics are attractive to generic players overall. We think all of these guys will be looking for acquisitions.

McDonald noted that generic companies such as Teva Pharmaceuticals Industries Ltd. (TEVA) or Actavis plc are not considered serious contenders in the biosimilar space, but could be if they began acquiring biosimilar producers.

Barbara Ryan, a partner at healthcare consultancy Claremont Partners, said she also believes the sector could see active dealmaking. "I would argue that it might drive consolidation," Ryan said, referring to the Hospira deal. She noted that some smaller companies may have portfolios and pipelines of biosimilars but limited means to commercialize them -- a situation tailor-made for larger companies may step in and consolidate.

Ryan added that while there are a number of different factors affecting biosimilars -- including FDA regulatory issues, approval and guidelines -- the pharmaceutical market nonetheless has moved from being dominated by small molecules to biologics.

Though biosimilars are similar versions of drugs, they're not to be confused with generics. Ryan cautioned that the industry is a long way from  interchangeability between the two. Biosimilars still must be marketed as separate products and make a push into the marketplace.

"Certainly biosimilars would offer an attractive product to patients, that could have lower prices," Ryan explained. "The key issue is going to be interchangeability. Biosimilars have a different connotation than generic small molecules."

The parties in the remand of the Teva v Sandoz Copaxone patent case filed their briefs with the Court of Appeals Tuesday. Here is Teva's brief and here is the generics' brief. 

As one would expect, Teva argues the new deference standard declared by the Supreme Court earlier this year in its decision reversing the Court of Appeals' previous decision in the case in favor of the generics requires the Court of Appeals now to affirm the original District Court decision in Teva's favor. The generics argue that even under the new deference standard the Court of Appeals should still overturn the original District Court decision and rule Teva's patent invalid.

To review, the District Court originally ruled for Teva that the subject patent was not invalid. The Court of Appeals gave the District Court no deference on the issue, disagreed, and ruled for the generics that the patent was invalid. The Supreme Court then, at Teva's request, reversed the Court of Appeals decision solely on the basis of the level of deference to be given to the District Court. The Supreme Court did not opine on whether the subject patent was or was not valid. All the Supreme Court said was that the Court of Appeals should have given the District Court's factual findings more deference. 

The question now is whether the Court of Appeals will still overturn the District Court's decision despite giving it more deference, or if instead the Court of Appeals will affirm the District Court's decision in light of the fact that the Supreme Court has ordered the Court of Appeals to give the District Court more deference. For patent lawyers, this is very exciting stuff. For the rest, I'm impressed if you're still awake.

At this point, it's not clear whether the Court of Appeals will schedule an oral argument in the case or proceed to render a decision.

Photo from.

Copaxone Patent Case Re-Appeal Expedited by Court

Earlier today I noted that Teva, Sandoz, Mylan, and Momenta jointly proposed a schedule to the Court of Appeals for handling the Copaxone patent case on remand from the Supreme Court. Late this afternoon the Court of Appeals rejected the parties' proposed schedule and instead issued an order saying:

The parties are directed to simultaneously file letter briefs explaining how the above appeals should be resolved in light of the Supreme Court’s remand. The letter briefs shall be limited to 15 double-spaced pages, due within 10 days of this order.

This is a faster schedule than what the parties had proposed, which would have had briefing last until March 20. Now the briefing will be done by March 2. It's not clear whether the Court of Appeals will schedule an oral argument after receiving the letter briefs from the parties, although I suspect they will.