WHAT TO WATCH FOR IN BIOTECH IN 2018

Note: The editorial content in this presentation was written and produced by the editorial staff of STAT with no participation from sponsors.

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Ø  A Very Brief Summary of Biotech 2017

Ø  FDA: How Low Can the Approval Bar Go?

Ø  Buy-side Sentiment

Ø  Drug Pricing & Reimbursement

Ø  Tax Reform & Repatriation

Ø  M&A

Ø  Biotech's Burning Questions

Ø  Key Clinical Trials in 2018

Ø  2018 Drug Launches

Ø  IPOs

Ø  What to Expect at #JPM18

A G E N D A

Ø  Adam Feuerstein @adamfeuerstein Senior Biotech Reporter

Ø  Damian Garde @damiangarde National Biotech Reporter

H O S T S

A V E R Y B R I E F S U M M A R Y O F B I O T E C H 2 0 1 7

•  We scienced the S#@^ out of it: CAR-T, gene therapy, RNAi

•  Stock Performance: Meh.

•  Trump: More bluster than bite.

•  Scott Gottlieb

•  IPOs in abundance

•  Mixed earnings

•  Fund flows: Neutral

•  M&A MIA

SOURCE: NASDAQ DATA

A V E R Y B R I E F S U M M A R Y O F B I O T E C H 2 0 1 7

F D A : H O W L O W C A N T H E A P P R O V A L B A R G O ?

•  Scott Gottlieb is the new Oprah.

•  More efficient, streamlined drug development (targeted therapies, rare diseases).

•  Patient-focused drug reviews.

•  Clinical data “flexibility."

•  Drug reviews to watch: Alkermes, Intra-Cellular Therapies, Sarepta Therapeutics.

•  Will an “easier” FDA lead to reimbursement crackdown?

•  What could go wrong? Safety!

SOURCE (LEFT TO RIGHT): J. SCOTT APPLEWHITE/AP, ANDREW HARNIK/AP, APSTOCK

F D A : H O W L O W C A N T H E A P P R O V A L B A R G O ?

SOURCE: FDA DATA

Num

ber o

f app

rova

ls  

N O V E L D R U G A P P R O V A L S B Y Y E A R

COMPANY DRUG INDICATION PDUFA DATE

Spark Therapeutics Luxturna RPE65-mediated inherited retinal dystrophies January 12

Gilead Sciences Bictegravir HIV February 12

Aerie Pharma Rhopressa Glaucoma February 28

La Jolla Pharma LJPC-501 Distributive shock February 28

Vertex Pharma Tezacaftor/Ivacaftor Cystic Fibrosis February 28

Novartis Kymriah DLBCL April 30

AbbVie, Neurocrine Bioscience Elagolix Endometriosis May 4

Amgen Aimovig Migraines May 17

BioMarin Peg-Pal PKU May 25

Achaogen Plazomicin UTI, Serious bacterial infections due to CRE June 26

GW Pharma Eplidiolex Lennox-Gastaut, Dravet syndromes (seizures) June 29

Ionis Pharma Inotersen TTR amyloidosis July 6

Alnylam Pharma Patisiran TTR amyloidosis August 12 (estimated)

Acorda Therapeutics Inbrija Parkinson's October 5

Alkermes ALKS 5461 Major depressive disorder TBD

Sarepta Therapeutics Golodirsen Exon 53 DMD TBD

Avexis AVXS-101 Spinal muscular atrophy TBD

Intra-Cellular Therapies Lumateperone Schizophrenia TBD

U P C O M I N G F D A A P P R O V A L S

B U Y- S I D E S E N T I M E N T

B U Y- S I D E S E N T I M E N T: J . P. M O R G A N

60% 11%

71% I N 2 0 1 6

84%

S E C T O R T A I L W I N D S S E C T O R H E A D W I N D S

•  M & A

•  C L I N I C A L D A T A / I N N O V A T I O N

•  E A S I E R F D A R E P A T R I A T I O N / T A X R E F O R M

•  R E I M B U R S E M E N T / P R I C I N G

•  N E G A T I V E S E N T I M E N T

•  C L I N I C A L D A T A F A I L U R E

•  L A C K O F M & A

Of respondents expect the biotech sector (NBI) to outperform the broader market in 2018

Of respondents expect the biotech sector (NBI) to underperform the broader market in 2018

Predicted outperformance

Expect an uptick in M&A in 2018. In 2017, it was 93 percent.

Most important clinical trial catalyst in 2018: IDO MELANOMA DATA (INCYTE / MERCK)

S E C T O R T A I L W I N D S S E C T O R H E A D W I N D S

•  M & A

•  T H E R A P E U T I C A R E A E M E R G E N C E

•  S E N T I M E N T

•  R E G U L A T O R Y L A N D S C A P E

•  D R U G P R I C I N G / P O L I C Y

•  C O M P E T I T I O N

•  S E N T I M E N T

•  P A T E N T C L I F F S

THE B IOTECH SECTOR IS

UNDERVALUED FAIRLY VALUED OVERVALUED

4 3 %

4 3 %

11 %

B U Y- S I D E S E N T I M E N T: R B C

B U Y- S I D E S E N T I M E N T: M I Z U H O S E C U R I T I E S

Do you plan to reallocate more dollars to biotech in

2018 than in 2017?

65% YES 35% NO

Do you expect biotech M&A to increase, decrease, or stay

flat in 2018?

92% INCREASE 1% DECREASE

7% FLAT

Are you more, less, or equally concerned about

drug pricing in 2018?

10% MORE 35% LESS

55% EQUALLY

P O L L # 1 : S E N T I M E N T

Complete this sentence: In 2018, biotech stocks will _______________.

D R U G P R I C I N G & R E I M B U R S E M E N T

•  2017 was all talk, no action with respect to legislative “fix” for high drug prices.

•  Ex-Eli Lilly executive Alex Azar will likely run HHS.

•  Insurer/PBM success stories: Hepatitis C, PCSK9s. Competitive price reductions, restricted market access.

•  What’s next? CGRP (migraine), CAR-T, Inflammatory diseases, oncology, multiple sclerosis, diabetes.

•  Orphan/rare diseases: Still protected but for how long?

•  Gene/cell therapy reimbursement: outcomes-based, annuities?

•  Politics: Midterm elections. Renewed bipartisan push to enact drug-price legislation?

•  Biosimilars: They’re here, not going away.

D R U G P R I C I N G & R E I M B U R S E M E N T

SOURCE (LEFT TO RIGHT): CAROLYN KASTER/AP, ELAINE THOMPSON/AP, APSTOCK

TA X R E F O R M & R E P AT R I AT I O N

•  Biotech companies already carry low tax rates because of multinational operations.

•  Repatriation of overseas profits will have larger impact.

•  Amgen: $40B in overseas cash.

•  Gilead: $31B in overseas cash.

•  M&A driver or more share buybacks?

T A X R E F O R M & R E P A T R I A T I O N

SOURCE: EVERCORE ISI

Biopharma’s overseas cash  

2017 (cash in billions)  

M & A

Thesis remains same: Large-cap biotech suffering from slowing growth due to maturing drug franchises and relative paucity of late-stage pipeline assets.

Ready access to cash and debt. Hence: More M&A.

M & A

2017 was disappointing.

9 public M&A

deals in 2017

= $57B compared to 10

public M&A

deals in 2016

= $59B

Note: The usual suspects.

LARGEST 2017 DEALS HOTTEST THERAPEUTICS CATEGORIES REMAIN THE SAME

TOP M&A CANDIDATES

for

$ 1 1 B

for

$ 3 0 B •  Oncology

•  CNS/neuro-psych

•  Rare disease

P O L L # 2 : M & A

Which one is most likely to be acquired?

A D A M ’ S TA K E : B I O T E C H ’ S B U R N I N G Q U E S T I O N S

Can they restore investor confidence and find new growth drivers following the mongersen failure and 2020 guidance cut?

Can they execute on the bictegravir and Yescarta launches? Can they

stabilize hepatitis C sales?

Will an Alzheimer’s drug finally work? If not, does Biogen have

a Plan B?

What happens if ALXN1210 fails?

How fast can the cystic fibrosis triple combos be approved?

A D A M ’ S T A K E : B I O T E C H ’ S B U R N I N G Q U E S T I O N S

Epacodostat better work. If not…?

When will you stop losing money?

Will you use all those billions of dollars on something other than

paying your lawyers?

Will the pace of the Dupixent launch continue to grow? Is

there anything truly innovative in the pipeline?

A D A M ’ S T A K E : B I O T E C H ’ S B U R N I N G Q U E S T I O N S

K E Y C L I N I C A L T R I A L S T O W AT C H

COMPANY DRUG INDICATION ESTIMATED DATA READOUT

Dermira DRM01 (Olumacostat Glasaretil) Acne Q1

Aimmune AR101 Peanut allergy Q1

Incyte, Merck Epacadostat+Keytruda Melanoma 1H

AstraZeneca Imfinzi+treme Lung cancer, head & neck cancer 1H

Esperion ETC-1002 (bempedoic acid) LDL-C lowering Q2

Alexion Pharma ALXN1210 PNH Q2

Acceleron, Celgene Luspatercept MDS, beta-thalassemia Q2

Celldex Glembatumumab Triple-negative breast cancer Q2

Dicerna DCR-PHXC Primary Hyperoxaluria 2H

Juno Therapeutics JCAR017 DLBCL 2H

K E Y C L I N I C A L T R I A L S T O W A T C H

2 0 1 8 D R U G L A U N C H E S

DRUG COMPANY LAUNCH DATE CONSENSUS SALES ESTIMATE – 2018

CONSENSUS SALES ESTIMATE – 2022

Yescarta Gilead Sciences Q4 17 $209M $1.39B

Kymriah Novartis Q4 17 $116M $992M

Repatha Amgen 2H 15 $784M $2.71B

Praluent Regeneron/Sanofi 2H 15 $295M $1.77B

Luxturna Spark Q1 18 $75M $364M

Bictegravir Gilead Sciences Q1 18 $884M $5.05B

Inotersen Ionis Pharma Q3 18 $5M $436M

Patisiran Alnylam/Sanofi Q3 18 $48.5M $1.02B

Aimovig Amgen/Novartis Q2 18 $92M $1.22B

Fremanezumab Teva 2H 18 TBD $607M

SOURCE: EVALUATE

I M P O R T A N T 2 0 1 8 D R U G L A U N C H E S

I P O M A R K E T

•  2017 was a solid year: 40 IPOs and the best average return since 2013

•  But can it last?

•  Biotech didn't beat the S&P 500 in 2017, and fund flows were negative on the year

•  And can the unicorns maintain their valuations?

I P O M A R K E T

SOURCE: NASDAQ DATA

Biotech IPOs by Year  

J . P. M O R G A N E X P E C TAT I O N S

P O L L # 3 : J P M E X P E C TAT I O N S

Which of these things is most likely to happen at #JPM18?

Q & A

THANK YOU

•  Adam Feuerstein @adamfeuerstein Senior Biotech Reporter

•  Damian Garde @damiangarde National Biotech Reporter

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