Icahn’s Bristol-Myers Stake, Biotech Cohort Rallies and Eli Lilly’s CEO Speaks

Article originally published in partnership with INO.com



Ever since President Trump met with a group of pharmaceutical executives at the White House, the entire biotech cohort has witnessed a resurgence as of late. This meeting was perceived as a positive interaction between the nascent government and the industry on a whole. This coincides with a consortium of big pharma companies joining forces to address transparency on drug price increases. Allergan (AGN), J&J (JNJ), Novo Nordisk (NVO), Merck (MRK) and AbbVie (ABBV) have committed to limiting any annual drug pricing increases to less than 10%. J&J, AbbVie and Merck all published annual reports regarding its portfolio and the price increases they’ve implemented. This transparency coalition is a step in the right direction to appease the general public and governmental officials that have been very critical of drug price increases. To add icing on the cake, Amgen’s CEO stated “We look forward to working collaboratively with the new administration.” Pharmaceutical executives are being proactive to be part of the conversation and be present at the table when it comes to working with Trump and his hardline stance regarding jobs and drug prices. The collaborative approach will hopefully bode well for the industry as a healthy relationship is fostered perceived on Wall Street.


Activists are targeting Bristol-Myers and Carl Icahn recently joined Jana Partners in this activist crusade by placing a stake in the company (Figure 1). Jana Partners became a major shareholder in Bristol-Myers in Q4 2016 and pressured the drug maker to add three more board members and approve an accelerated share buyback program of $2 billion. Carl Icahn reportedly believes the company's drug portfolio could be ripe for a takeover. Analysts have said that the company could make for a good acquisition, but more data on its cancer franchise may need to come through. Briefly, Bristol-Myers gained FDA approvals for Yervoy (first checkpoint inhibitor to get approved) and Opdivo (anti-PD-1 checkpoint inhibitor) in 2011 and 2014, respectively. Other companies have been active in the checkpoint inhibitor field as of late such as Merck and Roche. In August 2016, Opdivo failed a clinical trial. Meanwhile, Merck's anti-PD-1 drug met its primary endpoints in its version of the trial. This sent the stock falling from ~$76 to ~$47 per share or shedding 38% of its value. Speculation is that Icahn may initiate and facilitate takeover bids or entertain potential suitors for the company and its oncology portfolio.

Figure 1 – Announcement of Icahn’s BMY investment


Eli Lilly’s CEO David Ricks appears to be a champion of President Trump’s plan to lower taxes and incentivize companies to bring back manufacturing here in the U.S. President Trump told drug-makers he wants to make it easier for pharmaceutical companies to gain regulatory approval for their products. Ricks has called his past meeting with Trump "positive" and cited advantages already in place that make the pharma industry attractive to a pro-U.S., pro-business president, such as largely U.S.-based research and development. When it comes to drug prices, he contends that its growth is not a function of increasing drug costs and that "price played a 1 percent role in pharmaceutical growth that was 9 percent". "Pricing gets a lot of press, but it's actually not playing a key role in our return to growth." "We're trying to drive volume with new therapies," he said.

Ricks said that bringing manufacturing back to the U.S. would only work if U.S. corporate tax rates come closer to parity with the rest of the world, which is something the Trump administration is working towards. "The U.S. tax rates are not competitive with the rest of the globe. So getting those in-line, or perhaps even better, would be ... an advantage for looking at sites in the U.S. going forward," he said. Ricks said the U.S. needs corporate tax reform, "the U.S. is really the outlier here," and "our system is old, antiquated and this is the time for change." Further, the pharma CEO said he welcomes more support from the Trump administration when it comes to "trade enforcement." Ricks views this as something that could impact drug prices

ABOUT THE EDITOR - Noah Kiedrowski

I am biotechnology professional with a diverse scientific background and detailed knowledge in many therapeutic areas such as monoclonal antibodies, immunotherapies and antivirals. I have a personal interest in finance, investing, trading and global markets. My analysis is focused on stocks and exchange traded funds (ETFs) while exploring niche opportunities such as derivative trading via options. This newsletter is intended to provide investors with the latest developments and trends regarding the overall healthcare sector with a biotechnology emphasis. I'll be highlighting sector trends, merger and acquisition activity, noteworthy current events, political developments and drug approvals. My focus will be centered on well-established mid-cap and large-cap companies as well as utilizing appropriate ETFs as proxies for sector trends. This is a bi-monthly newsletter service that reflects my own opinions and analyses. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. I am not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates my analyses. I encourage all investors to conduct their own research and due diligence prior to investing.

This bi-monthly newsletter service reflects the opinions and analyses of INO Contributor, Noah Kiedrowski, founder of www.stockoptionsdad.com. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. Kiedrowski is not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates his own analyses. All traders and investors should conduct their own research and due diligence prior to investing.

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