Friday Five – Your weekly pharma review

Will that sales target come back to bite AstraZeneca's senior management?

When AstraZeneca successfully defended itself from Pfizer's unsolicited takeover approach in 2014, management said it would deliver revenue of $45 billion by 2023 (as a benchmark, sales declined 7 percent to $24.7 billion last year).

While there has been enough evidence to suggest that AstraZeneca is heading in the right direction by revitalising its R&D pipeline, this forecast is undoubtedly aggressive. Furthermore, the company is banking heavily on success in the immuno-oncology market where competition is fierce. Sell-side analysts – not exactly known for their conservatism – also appear to view the forecast constructively; a target set in mitigating circumstances.

For some shareholders, however, this figure represents a usable metric, against which the pay of CEO Pascal Soriot and other senior management should be set, at least partially. One can see the rationale; rather than move towards the price that would have seen AstraZeneca acquiesce to Pfizer's approach two years ago, the company's value has drifted downwards since May 2014. By comparison, Soriot's pay reportedly doubled in 2015.

Linking current pay packages to revenue targets set seven years in the future has numerous challenges – not least the risk that near-term decision making could be adversely impacted if remuneration is tied too heavily to long-term targets. AstraZeneca has, nevertheless, confirmed it is examining ways to evaluate senior pay packages against the $45 billion target in addition to dividend value and core earnings.

Epidiolex makes a breakthrough for cannabis-based medications

GW Pharmaceuticals announced this week that its cannabis-based medication Epidiolex met the primary endpoint in a pivotal-stage, Phase III study; cue a plethora of pun-heavy headlines. In reality, however, Epidiolex could offer a major therapeutic breakthrough for Dravet syndrome, a severe form of epilepsy.

As an orphan drug also granted fast track review by the FDA – and now partially de-risked by positive data from the first of two Phase III studies in Dravet syndrome – Epidiolex also represents a compelling in-licensing opportunity, with GW Pharmaceuticals open to the notion of an ex-US partnership.

Read FirstWord Pharma PLUS next week to see how neurologists have assessed the top-line data for Epidiolex and its potential role for the treatment of Dravet syndrome and other forms of epilepsy.

Valeant hits a new low

Just when it looked like things could not get any worse for Valeant Pharmaceuticals, the specialty pharma company found new ways to trigger an exodus of shareholders.
Updated revenue and earnings guidance, released on Tuesday, was well below expectations and the risk of Valeant defaulting on its debt commitment now hangs very firmly in the air.

Having insisted on numerous occasions over the past few months that Valeant's underlying fundamentals were strong, CEO Michael Pearson had little to hide behind on Tuesday's conference call. Previously supportive analysts have been left questioning whether management understands its own business; a $600 million 'typo' in Valeant's Q4 earnings release did not help matters, while analysts at Jefferies delivered what was the most damning assessment "all we can point to is third party sales data as evidence the company is real."

The numbers make for grim reading; Valeant's share price dropped more than 50 percent on Tuesday and a market cap worth $90 billion six months ago is now valued at $11 billion. A growth strategy built around aggressive M&A – and subsequent price increases – has come to a shuddering halt; Valeant is now worth less than what it spent on acquisitions last year.

Alzheimer's disease – is Eli Lilly raising the stakes or doing all it can to guarantee success?

Investors, analysts and the Alzheimer's disease community are eagerly awaiting data from Eli Lilly's EXPEDITION 3 study, which is assessing solanezumab for the treatment of mild-Alzheimer's disease. Data will be released in late 2016 or early 2017 and Eli Lilly appears to be doing its upmost to improve the odds of success; earlier this week, the company confirmed it has modified the primary endpoint; replacing the previous co-primary cognition and function endpoint, EXHIBITION 3 will continue with a single assessment of cognition.

Eli Lilly has justified the endpoint change by citing "emerging scientific evidence" that cognitive decline precedes and predicts functional decline in Alzheimer's disease, particularly in earlier stages of the condition. The other view, of course – one which initially latest KOL Views interview early next week to get the low down on what the change may mean for solanezumab, from a clinical, regulatory and – if EXPEDITION 3 is successful – commercial perspective.

Will Zydelig setback derail Gilead's aspirations in oncology?

Following a hugely successful reinvention of the hepatitis C landscape via its 2011 acquisition of Pharmasset, Gilead shareholders (not to mention biotech investors in general) are eager to see what M&A trick the company pulls out of its hat next. The onus, suggested analysts, would appear to focus on expansion in the oncology market, but Gilead's efforts to gain a foothold in the leukaemia market have faltered following toxicity concerns regarding Zydelig. European regulators have initiated a review of the therapy, while Gilead confirmed that it has scrapped six studies of Zydelig in combination with other therapies following an increase in severe adverse events – including deaths – mostly stemming from infections. The FDA has warned healthcare professionals about the deaths.

With usage of Zydelig likely to be limited to severe chronic lymphocytic leukaemia patients, sales of the therapy are likely to remain relatively flat, noted analysts at Jefferies. Given the significant return on investment Gilead has accumulated from its hepatitis C franchise, the top-line impact from a downgraded outlook for Zydelig will be minimal, they add; but it may stretch investor confidence in whether the company can evolve into a meaningful oncology player in the longer term. Furthermore, it has emerged that key oncology executive Philippe Bishop - hired from Genentech last year with much fanfare - left the company last month. Under pressure to diversify its pipeline, the risk for Gilead is that current troubles could prompt the company to act with too much haste.

To read more Friday Five articles, click here.

Reference Articles