IHS Global Insight Perspective | |
Significance | Novartis has said that it will no longer pursue the development of two drugs, Mycograb and Joulferon. Meanwhile, the company has reached a settlement to close an off-label marketing case in the United States. |
Implications | These two developments will collectively cost the company US$1.01 billion; US$590 million of this comes from the axing of Mycograb and Joulferon, and US$442.5 million from the legal settlement. |
Outlook | The full final losses from Mycograb and Joulferon will be limited, thanks in part to the US$390-million gain from the Enablex (darifenacin) divestment. In addition to the settlement for the off-label case, the company will also implement a Corporate Integrity Agreement in a bid to make its marketing activities more transparent. |
Mycograb and Joulferon to Be Axed
Swiss pharmaceutical giant Novartis has announced that it will be discontinuing research and development (R&D) activities on two of its investigational drugs: Mycograb (efungumab) for the treatment of invasive candidiasis in adults, and Joulferon (albinterferon alpha 2b) for the treatment of chronic hepatitis C. According to Novartis, Joulferon, which was being developed in collaboration with U.S. biotech company Human Genome Sciences, will be axed from the drug pipeline in response to feedback from U.S. and European Union (EU) regulators combined with new data on the required dose for the drug. For Mycograb, no specific reason was given to support the decision to stop the drug-development programme. In terms of the expected losses from the discontinuation of the two drugs, Novartis said that it expects to book a one-off impairment charge of US$590 million in the third quarter; US$230 million will be related to Joulferon, and US$360 million will come from Mycograb. However, the charges will be mitigated by the divestment of the U.S. rights to overactive bladder treatment Enablex (darifenacin) to U.S. company Warner Chilcott last month for an estimated US$400 million. Following this transaction, Novartis expects to book a US$390-million gain in the fourth quarter.
Settlement with U.S. Attorney's Office
In litigation-related news, Novartis's U.S. subsidiary has reached an agreement with the U.S. Attorney's Office for the Eastern District of Pennsylvania relating to civil and criminal investigations into the off-label marketing of epilepsy drug Trileptal (oxcarbazepine), and civil investigations into the off-label marketing of an additional five products: cardiovascular drugs Diovan (valsartan), Exforge (amlodipine and valsartan), Tekturna (aliskiren), irritable bowel syndrome drug Zelnorm (tegaserod maleate), and Sandostatin (octreotide acetate). The investigations follow a subpoena issued in 2005 in response to illegal promotion activities for Trileptal in terms of misbranding and off-label marketing, for which Novartis's U.S. subsidiary is set to plead guilty to a misdemeanour and pay out US$185 million in damages. According to prosecutors, Novartis illegally promoted the drug for other uses such as neuropathic pain and bipolar disorder. The company will also pay US$237.5 million to settle civil claims in the off-label marketing of the other five drugs. In addition, the company will also be required to enter a Corporate Integrity Agreement with the U.S. Department of Health and Human Services, under which it will be required to enhance compliance measures such as monitoring, auditing, reporting, and disclosures.
Outlook and Implications
The decision to pan Mycograb comes as little surprise, as the drug was rejected by the European Medicines Agency's (EMA's) Committee for Medicinal Products for Human Use (CHMP) in 2006 and 2007 due to concerns about the risk of cytokine release syndrome which was linked to the drug (see Europe: 26 March 2007: EMA Supports Extended Use of Actelion's Tracleer But Blocks Novartis's Mycograb and Switzerland: 21 November 2006: Two Steps Forward, One Step Back for Novartis As CHMP Gives Verdict on Lucentis, Exforge, Mycograb). Similarly, the decision to drop Joulferon from the pipeline is not totally unexpected. In April, Novartis announced that it would withdraw the European regulatory submission for the drug due to requests for additional data on drug dosage (see Switzerland: 21 April 2010: Novartis Inks Oncology Development Deal with Array Biopharma, Withdraws EU MAA for Joulferon). Given the new leadership in the company and changes to the R&D strategy to target rare and difficult-to-treat diseases, it makes sense for the company to eliminate these drugs at this stage. Given the gains from the sale of the U.S. rights for Enablex, Novartis is in a good position to absorb the losses that will ensue.
In terms of the settlement for the off-label marketing of the six drugs, Novartis announced earlier that it would top up its reserves to deal with outstanding marketing-related activities. Novartis is not the only pharmaceutical company that has been slapped with large fines following probes into its off-label promotion activities. U.S. firms Eli Lilly, Bristol-Myers Squibb (BMS), and Pfizer have all had to settle similar cases (see United States: 16 January 2009: Lilly's US$1.42-Bil. Zyprexa Settlement Is Finalised; United States: 22 July 2008: BMS Reaches US$9-mil. Settlement with Medicaid over Marketing Allegations and United States: 26 March 2010: Pfizer to Pay US$142 mil. in Damages over Neurontin Promotion).