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Novartis says nuclear and other new technologies will drive 20% of sales by 2023

Studios, Exhibitors Set To Spar Over Streaming

Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM


Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

Novartis says nuclear and other new technologies will drive 20% of sales by 2023

Novartis AG CEO Vas Narasimhan is staking his reputation on a pledge to use nuclear medicine and other pioneering technologies to drive some 20% of the Swiss pharmaceutical company's revenue within the next five years.

Narasimhan hopes to mine a rich seam of potential multibillion-dollar drugs across six different therapeutic areas, ranging from oncology to respiratory and neuroscience, by developing platforms for gene therapy, cell therapy and a type of nuclear medicine known as radioligand therapy.

All three are new approaches that Novartis is pursuing as part of a transformation of its business model under Narasimhan, who took over as CEO barely a year ago after 13 years with the Swiss pharmaceutical group, most recently as head of research and development. While his predecessor Joe Jimenez had a background in consumer goods — working in senior positions at H.J. Heinz before taking over Novartis' consumer business — Narasimhan is a Harvard-trained doctor who also worked at McKinsey & Co.

With 60 regulatory submissions expected before 2021 and a pipeline that includes 26 potential blockbusters, Narasimhan has moved rapidly to focus Novartis back on the science — and he intends to use these new technologies, alongside greater attention to data and analytics, as a platform to pull ahead of his competitors in the race to find new medicines.

"They are higher risk than continuing to focus on small molecules and biologics," the CEO told a small group of journalists gathered in London at a recent research and development update. "But I also think there's a risk in not pushing into new technologies and new areas of science to find breakthrough medicines."

He conceptualized the matrix of research platforms and therapeutic areas in terms of a game board that the company would use to make breakthroughs in medicine.

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With the acquisition in late 2017 of France's CERN spin-out Advanced Accelerator Applications SA, Novartis gained the radioligand technology, which is being deployed against certain types of gastrointestinal cancers, and more recently acquired Endocyte Inc. to build on the nuclear medicine franchise. Molecular nuclear medicine uses tiny amounts of radiopharmaceuticals, which are injected into the body and accumulate in specific organs where lesions or tumors are found. It has potential application in neurology, cardiology and orthopedics, although Novartis is using it only in oncology.

The AveXis Inc. acquisition on April 9 brought in a gene therapy platform, as well as a lead product AVXS-101, for spinal muscular atrophy type 1 with blockbuster potential. Novartis had already signaled an interest in gene therapy by licensing the rights to Spark Therapeutics Inc.'s Luxturna for a rare type of eye disease, outside of the U.S. in January 2018. Gene therapy is an experimental technique in which genes treat or prevent disease by being injected into cells.

The cell therapy platform is rooted in Novartis' own development of Kymriah, the first ever chimeric antigen receptor T cell medicine to be approved by U.S. regulators. CAR-T cell therapy harnesses the patients' own immune system to kill cancer cells, in a complex process that involves collecting some of the patient's white blood cells through a specialized blood filtration system and re-engineering them before infusing the patient once again.

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Vas Narasimhan

Looking ahead, Narasimhan's game board could be shaken up by exiting therapeutic areas that Novartis has had a presence in, and seeking breakthrough medicines in new fields. He signaled a potentially broader presence in diseases of the liver, where the Basel, Switzerland-based group has already indicated an increasing interest in fatty liver disease by signing up joint ventures with Allergan PLC and Pfizer Inc., and in kidney disease. Also known as NASH, the market for the condition is estimated to be worth $18.3 billion by 2026, according to a recent estimate by GlobalData.

"We're asking ourselves the question: Over time do we need to pivot to new areas and exit older areas?"

Novartis been more rigorous with its early-stage research, based at the Cambridge, Massachusetts-based Novartis Institutes for BioMedical Research. Jay Bradner, who has overseen NIBR since 2015, has accelerated the pace of out-licensing on a number of projects that do not meet a more stringent time threshold, according to Narasimhan. Bradner co-founded five companies from his laboratory at the Dana-Farber Cancer Institute, where he was a physician for a decade, before joining Novartis.

Alongside the appointment of a new head of R&D in John Tsai, the imminent spin-out of its Alcon eye care division in January 2019, and selling the consumer business back to GlaxoSmithKline PLC, all the vital signs at Novartis point to a company that does not want to be distracted from pursuing the science.

"The bets we make today pay off seven to 10 years from now and we have to be completely aligned as a leadership team behind that," the CEO said.

Reiterated commitment to Sandoz

Narasimhan nevertheless remains committed to keeping the generics business for the moment, although analysts at Cowen have questioned whether he might be preparing Sandoz for a similar spinoff to Alcon. Noting that such a move is at least 12 to 18 months away, given the time required to compile independent financial data, Cowen's Steve Scala, who has an "outperform" rating on the company, also highlighted complicating factors including some shared manufacturing for both Novartis and Sandoz.

"Novartis is working to give Sandoz more freedom to operate autonomously within the group to ensure it can compete sustainably in the global off-patent segment," company spokesman Sreejit Mohan told S&P Global Market Intelligence. "Our goal is to transform Sandoz into a focused and agile global leader in differentiated off-patented medicines."

Tim Anderson, analyst at Wolfe Research with a "market weight" rating on Novartis, said the R&D update reaffirmed his positive view of the company, noting that the group's core R&D abilities are solid and that it is a catalyst-rich pipeline story in the near-term.

"I think a lot of the interest is being driven by the pharma world going through its own technology revolution at the moment," said Nooman Haque, an investment banker to the life sciences industry at Silicon Valley Bank. "I do think there's a lot of promise but is it going to be as transformative to those big pharma models?

"For the early stage, no doubt, but how quickly will pharma be to adopt it? I see a parallel in the early days of the internet."

Technology, Media & Telecom
Studios, Exhibitors Set To Spar Over Streaming

Dec. 14 2018 — According to an article published in Variety in November, Warner Bros. and Universal Pictures are expected to reopen conversations with exhibitors about earlier VOD releases for their films. The studios argue that an earlier on-demand release helps minimize piracy and allows them to better leverage the multimillion-dollar ad campaigns launched for their films' theatrical debuts.

Exhibitors, on the other hand, worry that a shorter theatrical window will reduce ticket sales as potential patrons opt to wait and watch films at home. Fewer ticket sales also lead to lower concession revenues -- the most profitable aspect of the exhibition business.

The article also notes that studios have an extra incentive to negotiate earlier release windows, as WarnerMedia is launching its own streaming service in 2019 while Comcast, home of Universal, is looking to expand its streaming offerings. Having their major films released on their respective services shortly after theatrical release could help drive subscriber growth.

Pushing for a film's possible VOD release just weeks after its big-screen debut could be seen as an aggressive move, but studios have been slowly shrinking their theatrical release windows over the past 20 years. In 1999, the average theatrical window was 169 days; this was just as the DVD market was beginning to explode and the VHS cassette was still a market factor. Soon, DVD became a massive source of revenue for studios and they began to release their films on home video at a quicker pace. In 2017, the average theatrical window dropped to 105 days before dipping to 99 days in 2018.

The major studios all trimmed their theatrical windows by a fair amount between 2000 and 2018, from an average of 172 days down to 94 days, a difference of more than two and a half months. Twentieth Century Fox and Universal Studios had the shortest average theatrical window at 89 days, while Walt Disney had the longest theatrical window at 107 days.

We tracked eight blockbuster films in 2018 that were released on home video less than 90 days after premiering in theaters. The shortest window belonged to "Venom" ($212.3 million domestic gross), which was released in theaters on Oct. 5 and will debut on DVD and Blu-ray just 74 days later on Dec. 18.

The motion-picture business has always been able to capitalize on new technology, from the TV to the VCR to the DVD player, to drive growth. Streaming video has become the primary source for home entertainment — just ask Netflix and its 137.1 million subscribers worldwide. If studios are launching their own services, they naturally want their own premiere content on those services. Studios may not get the rapid release window they are hoping for, but they will likely keep bringing it down slowly, as they have for the past two decades.

If you are a client then learn more about Economics of TV & Film below:

Movies make their way to your home in less than 100 days in 2018

State of Home Entertainment 2018

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Watch: Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM

Dec. 13 2018 — In our latest Power Forecast Briefing, Steve Piper discusses recent power market activity and a forecast that points to profitability for merchant generation regions of ERCOT and PJM. Both saw improved spark spreads in 2018, but ERCOT's upside appears more limited than PJM going forward. More data and market tracking tools can be found on the Market Intelligence platform’s Power Forecast subscription.

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Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.

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Technology, Media & Telecom
Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

Dec. 10 2018 — Walt Disney Co.'s pending acquisition of much of 21st Century Fox Inc. certainly raised the bar for cable network valuations — at 15.4x cash flow — and the divestiture of the regional sports networks may see another double-digit-multiple transaction with Inc. in the mix of buyers. Another deal, Nexstar Media Group Inc.'s pending acquisition of Tribune Media Co., sees stakes in three cable nets going to the buyer for single-digit multiples (6.9x).

The deal follows the collapse of Sinclair Broadcast Group Inc.'s deal to buy the company, which is now being litigated. We think that Nexstar is getting quite a deal on the cable network assets and will likely flip them for a quick profit.

When Discovery Inc. agreed to buy Scripps Networks Interactive Inc. in July 2017, the domestic cable networks were valued at $10.14 billion, or 10.5x cash flow, with Food Network (US) valued at $4.5 billion (Scripps owned 68.7%) and Cooking Channel (US) (also at 68.7%) valued at $525 million.

In the current transaction, the valuations come to $3.47 billion and $323 million, respectively. Thus, if Nexstar can get Discovery Communications to pay at least what it paid in the Scripps transaction, Nexstar may make a quick profit. Granted, minority interests typically trade at a discount. Scripps Networks Interactive, however, has tried for years to cut a deal to buy out the minority stake and it may be willing to strike a deal at a higher price to put this issue behind it.

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