How’d Big Pharma do this year? Very well. I decided to give every drug company with a market capitalization greater than $50 billion a letter grade, just like in school. The basis for the grades: I started with stock performance as a basic metric, and then considered each company’s scientific and medical output, whether or not its behavior was ethical, and the general drift of its business. I skipped the medical device giants, Medtronic and Abbott.
I gave one A+, to Bristol-Myers Squibb, based on its overall performance and its pioneering development of cancer drugs that work by priming the immune system. Gilead Sciences would have gotten one two were it not for the ethical issues surrounding its stopped collaboration with Bristol in hepatitis C, which I think hurt some patients. I am giving no Ds or Fs. There were no big drug disasters on a par with the recall of Merck’s Vioxx or Pfizer’s Bextra this year. Not even close.
Companies are sorted by the letter grade I gave them, and, where there was a tie, by stock performance. Let me know what I got right – and what I got wrong.
The Best Drug Companies
1. Bristol-Myers Squibb CompanyMarket capitalization: $87 billion Stock appreciation: +61.4% Grade: A+
Sure, the big-cap biotechs delivered better stock performance. But Big Pharmas don’t trade like this, and Bristol’s transformation, started under James Cornelius and continuing under current chief Lamberto Andreotti, has simply been amazing. (Former R&D head Elliot Sigal deserves credit, too.) Bristol is leading the way when it comes to cancer immunotherapy, which Science Magazine named as the breakthrough of the year. It’s smartly jettisoning its diabetes business to focus on what is working. And it is a player in hepatitis C, the other hot area this year. The clincher: this company is consistent. Last year was just as good.
2. Celgene CorporationMarket cap: $67 billion Stock appreciation: +107% Grade: A
This maker of high-priced cancer drugs delivered incredibly solid performance, even though its medicines didn’t make headlines outside of the biotech sector. Flagship product Revlimid, descended from its initial testing of thalidomide as a cancer drug, is gaining traction as a long-term therapy in multiple myeloma. Abraxane proved effective – and was approved – in pancreatic cancer. And Pomalyst, another thalidomide descendent, was also approved. Investors are becoming excited about apremilast, for psoriasis, too.
3. Biogen IdecMarket Capitalization: $67 billion
Stock appreciation: +92% Grade: A
The failure of an ALS drug dings Biogen slightly, but it really was a near-perfect year. The launch of MS drug Tecfidera was simply stunning, and Biogen succeeded in getting European protections that will allow it to profit from the medicine there, too. It’s new hemophilia drugs are trucking along.
4. Gilead SciencesMarket capitalization: $113 billion Stock appreciation: +100% Grade: A-
Gilead’s purchase of Pharmasset for $11 billion in 2011 is looking like one of the best pharma acquisitions ever. It gave Gilead Sovaldi, a new hepatitis C drug that, as part of a combination pill, could become the new standard of care, helping cure millions of people worldwide from the liver-destroying virus. I would have given Gilead an A+ had it not been for the decision to discontinue a combination of Sovaldi with a Bristol-Myers drug; Gilead’s own combo looks as good in most subtypes of the virus, but not all, and patients now have to wait for an effective combo they might have had earlier if the collaboration had continued. This delay was the best move for Gilead and its shareholders, but not for patients. The worry for investors now: can Sovaldi really be as huge (think $10 billion) as everybody expects?
5. AbbVieMarket capitalization: $86 billion Stock appreciation: +59% Grade: A-
AbbVie was supposed to be the less appealing part of Abbott Laboratories, which split itself in two last year. The story was that the pharmaceutical division was dragging down the medical-device-and-baby formula units. But AbbVie has outperformed Abbott for three reasons: its top-seller, Humira for rheumatoid arthritis, continues to perform well; its hepatitis C franchise is the main challenge to Gilead; and its oncology pipeline is delivering.
6. RocheMarket capitalization: $235 billion Stock appreciation: +32% Grade: B+
Roche still seems a bit like two different drug companies. There is Roche, which had saw a major treatment for diabetes and heart disease it had tested in a giant trial fail. And then there is Genentech, which had major drug approvals for Kadcyla, in breast cancer, Perjeta, also in breast cancer, and Gazyva in chronic lymphocytic leukemia. The truth is no company is doing better at developing new cancer drugs. As for the big Swiss drugmaker, well, it’s doing some interesting work in psychiatry.
7. Johnson & JohnsonMarket capitalization: $261 billion Stock appreciation: +32% Grade: B+
Last year J&J was coping with both with the blaring headlines surrounding the recall of children’s over-the-counter medicines like Tylenol and Motrin and problems with metal-on-metal hip implants. Those problems have abated some, and the pharmaceutical division has been delivering. Xarelto seems to be one of the few new blood thinners not struggling, and Zytiga, for prostate cancer is doing well too.
8. GlaxoSmithKlineMarket capitalization: $126 billion Stock appreciation: 18.1+ Grade: B+
Glaxo had some nice wins at the FDA, bringing to market a combination of drugs for patients with melanoma whose tumors have a particular genetic mutation and new drugs for chronic obstructive pulmonary disease. But it would have won just a B based on the performance of its business. I’m giving it a bump because of Chief Executive Andrew Witty’s attempts at reforming the downside of what it means to be a drug company. After accusations hit that it had bribed doctors in China, Witty decided to stop paying doctors to give talks – the kind of practice that led television personality Dr. Drew Pinsky to hawk a Glaxo antidepressant on radio call-in shows a decade ago. Before that, Glaxo pledged to make the basic data from its clinical trials available to researchers who want it, a big step toward scientific transparency. Maybe Witty’s doing this for show. I wish other drug company CEOs would, too.
9. AmgenMarket capitalization: $85 billion Stock appreciation: +30.8% Grade: B
Amgen made a smart purchase, buying Onyx Pharmaceuticals for $10.2 billion in a bid to move into anti-cancer drugs. Other highlights: Good execution on denosumab, for bone cancer and osteoporosis, and solid plans for a business of copycat biotech drugs. There are big hopes for its antibody to PCSK9, which could be the next big cholesterol drug. No reason to jump up and down with excitement, but nothing to frown about, either.
10. Pfizer Inc.Market capitalization: $199 billion Stock appreciation: +23% Grade: B
Pfizer spun off its animal health business, Zoetis, generating investor excitement that the company could complete an even bigger break-up, separating its generic drug business from its pipeline of experimental drugs. The launches of the blood thinner Eliquis, sold with Bristol-Myers Squibb, and Xeljanz, for rheumatoid arthritis, are selling less briskly than many investors hoped. But palbociclib, an experimental breast cancer drug, is looking promising. Trial results from a mid-stage study of palbociclib will emerge in 2014. Also expected: a big trial testing whether its Prevnar 13 vaccine prevents pneumonia in adults.
11. NovartisMarket cap: $189 billion Stock apprecition: +22.5% Grade: B
Novartis is a cutting edge oncology company. It is developing the cancer-fighting gene therapy developed by Carl June at the University of Pennsylvania, and that treatment, known as a chimeric antigen receptor immunotherapy. An experimental multiple myeloma drug is also showing promise. Its plan to consider selling off some divisions is smart and shareholder-friendly. What lowered its grade: a research scandal in Japan over studies of Diovan, the blood pressure drug that was its best-seller for years, and lingering questions about manufacturing in its direct-to-consumer business.
The Rear Guard
12. Novo NordiskMarket capitalization: $75 billion Stock appreciation: +7.8% Grade: B-
After years of phenomenal performance as it invaded the U.S. insulin market, Novo was hit by a big setback this year as the FDA told it to conduct more safety trials of a long-acting insulin. Still, the company has a formidable collection of diabetes medicines and is doing fine.
13. Merck & Co.Market capitalization: $143 billion Stock appreciation: +19.4% Grade: B-
Oh, Merck, running so hard to stay in place. This time last year its niacin drug for high cholesterol proved toxic and it delayed filing a key osteoporosis pill with the FDA. Then it announced it was replacing Peter Kim, head of R&D. It later announced that it would cut 8,500 jobs. Next year could be tough, too. The study of Vytorin in heart disease that should read out in 2014 is, to put it kindly, high risk.
No wonder Chief Executive Ken Frazier is having trouble regaining Wall Street’s confidence. But he is doing a lot of the right things: replacing Kim with former Amgen R&D honcho Roger Perlmutter; focusing the labs on a few key programs, including its exciting PD-1 antibody for various cancers, which could be a breakout product; expressing a willingness to spin off animal health or do other shareholder-friendly deals. It’s the sense that Merck is making a real shift that saved it from a lower grade, and that could deliver dividends in the new year.
14. SanofiMarket capitalization: $135 billion Stock performance: +7.3% Grade: B-
Sanofi had a great year last year; this year, not so much. I’d like to see more evidence that the R&D turnaround that chief executive Chris Viehbacher and research chief Elias Zerhouni are trying to execute. Going well: the collaborations with biotech Regeneron, including its experimental cholesterol drug that targets the enzyme PCSK9. Not going well: the company keeps missing Wall Street’s earnings forecasts after promising to return to growth, and, like GlaxoSmithKline, it got embroiled in accusations of Chinese bribery.
15. AstraZenecaMarket capitalization: $73 billion Stock appreciation: +24.5% Grade: C+
The market seems happy with the performance of new chief executive Pascal Soriot, but I’m not. He made a big bet on Brilinta, the new blood thinner that is similar to Plavix, and sales have increased 208% – to just $75 million in the third quarter. There’s no indication this will be a big drug, especially when there is a Department of Justice investigation looming over its clinical trials. There doesn’t seem to be much of a strategy to the company’s acquisitions, although its big purchase of its diabetes venture with Bristol-Myers Squibb at least makes sense. The pipeline from its MedImmune division is promising, but there needs to be a clearer sense of direction for the company as a whole.
16. Eli Lilly and CompanyMarket capitalization: $57 billion Stock appreciation: +2.4% Grade: C
Over the past decade, Eli Lilly has ceded its leadership in diabetes to Novo Nordisk and Sanofi. Now, patent protection is vanishing for its stable of neuroscience drugs, most notably Zyprexa (gone) and Cymbalta (going). The diabetes business is resurgent, and there’s been some positive movement in cancer. But it seems like every time anyone gets excited about Lilly’s prospects, it’s over a medicine with very slim prospects: solanezumab for Alheimer’s or ramucirumab in breast cancer. And those potential home runs keep getting turned into strikeouts.
Source Article from http://www.forbes.com/sites/matthewherper/2013/12/31/grading-pharma-in-2013-16-drug-companies-ranked/
Grading Pharma In 2013: 16 Drug Companies Ranked
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