Bayer’s $14.2 billion Merck buy shows pharma strategy split
Bayer AG’s $14.2 billion acquisition of Merck & Co. is the latest in a series of big pharma deals and it exposes a deepening split in the way drugmakers approach their portfolios.
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Indiana University plans to turn the former Wishard Memorial Hospital campus into a 26-acre, $200 million research complex that would bridge IU’s School of Medicine with the city’s life sciences firms, including those at the nascent 16 Tech business park. The plans call for classrooms, offices, labs and business-incubation space. The university is trying to lure the newly created Indiana Biosciences Research Institute to the facility. And the School of Medicine wants to set up a drug discovery center, which would house 12 of its faculty. IU’s public health and dentistry schools have eyed the complex as a possible home base, said Jay Hess, dean of the IU med school. The former Wishard will also become the new home of the Indiana University Research and Technology Corp, which tries to commercialize the intellectual property created at IU. The IURTC announced in April that it will sell its Innovation Center on West 10th Street.
A highly touted partnership between St. Vincent Health, Community Health Network and the Suburban Health Organization is coming to an end—just 18 months after it began. The Accountable Care Consortium was envisioned as a vehicle through which the hospitals would eventually funnel all of their roughly $2.5 billion in annual contracts with health insurers and employers. Those contracts would have been based on the ability of St. Vincent, Community and the suburban hospitals to keep patients healthy and in need of less care, especially expensive hospitalizations and surgeries. The concept is known in health care circles as “population health management.” The consortium signed up 12 employers as customers—half of which were among the hospitals that formed the consortium. Those hospitals included the 22 operated by St. Vincent, eight operated by Community and six that are part of the Suburban Health Organization. But the hospitals found that changes in the marketplace were happening at a faster pace than they anticipated—making it difficult to coordinate responses fast enough.
Endocyte Inc. stock plunged more than 60 percent Friday after the drug it’s developing with Merck & Co. backing failed to help patients in an ovarian cancer trial. The news could be particularly bad for the West Lafayette-based company, which has no other marketed products. According to Bloomberg News, the Phase 3 study was stopped after an analysis showed that vintafolide didn’t demonstrate efficiency when treating patients with platinum-resistant ovarian cancer, the companies said in a statement Friday. Just over a month ago, Endocyte was being mentioned as a possible premium takeover target after it reported that vintafolide slowed progression of lung cancer and won European backing to treat ovarian cancer. Endocyte said it will continue to test vintafolide for lung cancer, with late-stage data possible toward the end of the year. Endocyte has 70 employees in West Lafayette and 25 in Indianapolis. An Endocyte spokeswoman declined to say whether Endocyte expects to trim its work force as a result of the setback with vintafolide.
Health information technology firm hc1.com promised to nearly triple its Indiana work force over the next five years, adding 175 jobs by 2019. Hc1.com currently employs 93 people, mostly in Indiana. The company makes software that helps medical labs, radiologists and other medical offices manage patient records, bills and other data critical to managing their operations. Hc1.com will invest $2.5 million to lease and renovate 9,466 square feet to expand its existing 16,626-square-foot headquarters in Northwest Technology Park at 96th Street and Zionsville Road. The firm has quietly raised more than $14 million from investors. CEO Brad Bostic told IBJ last year that hc1.com was on track to double its $10 million in annual sales. The Indiana Economic Development Corp. offered hc1.com Inc. up to $3 million in tax credits and up to $100,000 in training grants based on the company’s job-creation plans. The credits are performance-based, meaning the company only receives them once Hoosiers are hired. Boone County is contributing $50,000.
A group of prominent corporate executives has created a new organization to find ways to reduce obesity among central Indiana children. Jump IN for Healthy Kids has a budget of $1.5 million and hired Indianapolis attorney Ron Gifford to spearhead the effort. Jump IN was founded by 17 local executives, including Eli Lilly and Co. CEO John Lechleiter, Roche Diagnostics Corp. CEO Jack Phillips, Anthem Indiana President Rob Hillman, Indiana Pacers President Jim Morris, IUPUI Chancellor Charles Bantz, Indianapolis Star Publisher Karen Crotchfelt, Lilly Endowment CEO Clay Robbins, United Way of Central Indiana CEO Ann Murtlow, YMCA of Greater Indianapolis CEO Eric Ellsworth, and the CEOs of the major hospital systems in Indianapolis. The group hopes to identify successful efforts to improve diet, activity and healthy choices among children and their families—both around Indianapolis and around the country—and then work to replicate or adapt those efforts to reach more people in the metro area. Jump IN hopes to work with schools, churches, employers, medical providers, grocery stores, neighborhood associations and individual families.
WellPoint Inc.’s first-quarter medical enrollment rose 1.3 million from the prior three-month period as WellPoint benefited from new customers through the Obamacare exchanges. According to Bloomberg News, WellPoint has the highest share of enrollments of insurers through Obamacare, with 400,000 on government exchanges through Feb. 14. Those customers also are younger than anticipated, making the company’s prediction of “double-digit” rate increases next year less likely. WellPoint said it now expects 600,000 enrollments through the public exchanges this year. WellPoint's profit swooned in the first quarter, but less than analysts expected. It earned $701 million, down 21 percent from a year earlier. Excluding investment gains and one-time charges, those profits translated into earnings per share of $2.30, down from $2.94 a year ago. But Wall Street analysts expected profit to dip as low as $2.13 per share, according to a survey by Thomson Reuters. For all of 2014, WellPoint now expects to earn more than $8.40 per share, up from a forecast of more than $8.20 it issued in March, and a forecast of $8 it issued in January.
Drug prices surge as generics, niche treatments eat profit
Since 2007, the cost of brand-name medicines has jumped, with prices doubling for dozens of established drugs that target everything from multiple sclerosis to cancer, blood pressure and even erections, according to an analysis conducted for Bloomberg News.
CEOs launch childhood obesity initiative
Jump IN for Healthy Kids has a budget of $1.5 million and hopes to identify and extend successful efforts to improve diet, activity and healthy choices among children and their families.
Megadeals drive torrid pace for M&A activity
The value of corporate takeovers announced in 2014 hit the $1 trillion mark Monday, reaching that level at the fastest pace in seven years.
Lilly Endowment sells Lilly stock for first time since ’08
Indianapolis-based Lilly Endowment sold 150,000 shares of Eli Lilly and Co. stock on Monday, resuming a short-lived asset diversification plan suspended when stock prices swooned in 2008.
Lilly trade-secret defendants released to home detention
The court noted that after the government filed a second indictment March 12, the trade-secret theft claims against Guoqing Cao and Shuyu Li were changed to wire fraud, and aiding and abetting and conspiracy to commit wire fraud.
Company news
When John Lechleiter was named CEO of Eli Lilly and Co. in late 2007, the Indianapolis-based drugmaker derived just 5 percent of its annual revenue from its Elanco Animal Health subsidiary. But next year, after Lilly completes its $5.4 billion acquisition of Novartis Animal Health, Elanco will contribute 17 percent of revenue—or one out of every six dollars flowing into Lilly’s coffers. It’s been a swift transformation for Greenfield-based Elanco. In the mid-2000s, Lilly employees often tried to avoid or leave posts at Elanco because its future was in doubt. “Five years ago, people said, ‘Don’t go to Elanco because they’re going to get sold,’” Elanco President Jeff Simmons said in a 2010 interview. But the 2007 decision by Lechleiter and the Lilly board to invest in Elanco turned things around. Elanco now employs 3,500 worldwide, up from 2,500 a few years ago. Elanco’s revenue has shot up from $996 million in 2007 to $2.2 billion last year—growth of 120 percent, which is three times faster than the rest of the animal health industry. Of that growth, 60 percent has come organically, as Elanco aggressively pushed its products into foreign markets to complement its strong presence in the United States. The other 40 percent has come via acquisitions. The Novartis deal, expected to close in early 2015, will be Elanco’s eighth purchase in as many years.
Two Warsaw-based orthopedic implant companies agreed to merge last week in a $13.4 billion deal. Zimmer Holdings Inc. will acquire Biomet Inc., whose private equity owners had planned to stage a public stock offering this year. Biomet posted $3.1 billion in revenue in 2013, up from $2.8 billion in 2012, according to IBJ research. It employs 9,000 people worldwide. Zimmer reported $4.6 billion in revenue in 2013. It has about 9,500 employees. “This will give Zimmer some leverage when they go to hospitals, and help them compete,” said Jason McGorman, an analyst at Bloomberg Industries in Princeton, N.J., according to a report by Bloomberg News. Also, “they get a little more in terms of products in other areas, like sports medicine, extremities and trauma, where Zimmer has less exposure.” Zimmer will pay $10.4 billion in cash and issue shares of its common stock valued at $3 billion to Biomet Inc.'s equity holders.
Eli Lilly and Co.’s drug ramucirumab won approval from U.S. regulators to be sold under the brand name Cyramza as a treatment for gastric cancer. According to Bloomberg News, analysts expect the drug could bring in annual sales of more than $1 billion. Lilly is trying to launch new cancer and diabetes drugs to offset the loss of revenue from the anti-depressant Cymbalta, which saw its U.S. patent expire in December. Lilly obtained the drug Cyramza in its acquisition of ImClone Systems Inc. in 2008. Lilly is also studying the drug in lung, liver and colorectal cancers.
Dow AgroSciences LLC reported record sales of $2.1 billion in the first quarter, an increase of 1 percent over last year's first period, the Indianapolis-based company reported April 23. The subsidiary of Midland, Mich.-based Dow Chemical Co. also reported record earnings before interest, taxes, depreciation and amortization, or EBITDA, of $529 million, up 9 percent from a year ago. Dow Agro said higher sales and lower expenses boosted profit. Sales of crop-protection products grew 4 percent overall in the quarter, mainly due to gains in foreign markets. Sales of new crop-protection products rose 28 percent. Sales of seeds and seed traits fell 7 percent in the quarter, partly due to the late planting season in the United States.
ITT student-loan bet stings Lilly’s credit union
A default-prone portfolio of loans to ITT Educational Services students has come back to haunt Eli Lilly Federal Credit Union, a full-service but otherwise conservative institution.
Novartis deal caps turnaround for Elanco
Next year, after Lilly completes its $5.4 billion acquisition of Novartis Animal Health, Elanco will contribute 17 percent of revenue—or one out of every six dollars flowing into Lilly’s coffers.
Zimmer shares hit 13-year high on Biomet deal
The deal will help Zimmer, a maker of artificial hips and knees, take on Johnson & Johnson, the No. 1 manufacturer in the now-growing $45 billion market.
MAURER: Good science—and some creativity—keep Lilly on its game
Things look bright for the city’s pharma giant even if it doesn’t borrow marketing slogans.
Lilly’s quarterly profit meets analyst expectations
The drugmaker, which is weathering patent expirations, saw sales fall more slowly than expected for its antidepressant Cymbalta.
Investor pressure pushing drugmakers to make deals
Tuesday’s blockbuster deal involving Indianapolis-based Eli Lilly and Co. was just the latest of several that have taken place since the beginning of the year.
Three more charged in $80M heist of Lilly drugs
Three Florida men who federal authorities say stole about $80 million in prescription drugs from an Eli Lilly and Co. warehouse in Connecticut have been charged with conspiracy and theft.
Lilly to pay dearly for Novartis animal health biz
Wall Street analysts raised their eyebrows at the hefty price Eli Lilly and Co. will pay to acquire Novartis Animal Health, when compared to the value of the biggest player in the field.
Lilly wins approval for potential blockbuster drug
The Indianapolis-based pharmaceutical maker gets a much-needed boost with FDA approval for gastric-cancer drug ramucirumab, which quickly could account for $1 billion in annual sales.
In Indiana, everyone makes big profits on health care
Indiana is the most profitable state for Indianapolis-based WellPoint Inc., which operates Blue Cross and Blue Shield health plans in 14 states. WellPoint’s margin for Indiana in 2012 was 5.8 percent, 38 percent higher than WellPoint’s national average.
Company news
Assembly Pharmaceuticals, a company with roots in Bloomington and San Francisco, has attracted an undisclosed amount of investment from New Jersey-based Johnson & Johnson Development Corp., Indianapolis-based Twilight Ventures, Zionsville-based Luson Bioventures, BioCrossroads Indiana Seed Fund II and private investors. Assembly is developing drugs that could cure chronic hepatitis B virus, or HBV, infection. Chronic HBV affects an estimated 350 million people worldwide, causing cirrhosis and liver failure and in some cases liver cancer. More than 600,000 deaths each year are attributable to HBV, which can be suppressed with lifelong therapy but which has no known cure. Assembly was formed in 2012 by Indiana University professor Adam Zlotnick and Dr. Uri Lopatin, who led HBV programs at Gilead Sciences and Roche Pharmaceuticals. Assembly has licensed intellectual property from the IU Research and Technology Corp. that was discovered in Zlotnick’s laboratory. Other co-founders of the company include IU chemistry professor Richard DiMarchi; Derek Small, president of Luson Bioventures; and William Turner, a former medicinal chemist at Lilly Research Laboratories.
Carmel-based nursing home developer Mainstreet Property Group LLC promised investors returns of 14 percent to 18 percent for investments in nursing homes it is now building around Indiana, according to a private document obtained by the Associated Press. Under its business model, Mainstreet arranges financing for its facilities, then leases the completed buildings to a private operator. The buildings are then sold to HealthLease Properties Inc., a real estate investment trust controlled by Zeke Turner, who is also CEO of Mainstreet. According to the document, Mainstreet was looking to raise $60 million to build 12 new nursing homes at a cost of $199 million combined. In the case of three nursing homes it planned, Mainstreet expected to sell each for roughly $20 million, collecting between $3.3 million and $5.3 million on each sale, which would represent profits of 16.5 percent to 26.5 percent. The document does not include expected sale prices for the other nine facilities. Some previous facilities appeared to have generated even larger profits. In the case of Wellbrooke of Westfield, a new health care facility Mainstreet completed last year, investors put in $750,000 and made a $4.5 million profit, according to the Associated Press. For eight nursing home sales to HealthLease detailed in the Mainstreet document, Mainstreet investors made $34 million on an investment of $14 million, for a $20 million profit.
Indiana University's trustees have selected a downtown Evansville site for a nearly $70 million health education and research center planned by IU's medical school and three other schools. The board of trustees approved the location Friday following a recommendation by IU President Michael McRobbie. The University of Evansville, the University of Southern Indiana and Ivy Tech Community College also plan to offer programs at the center that could draw some 2,000 health care students.
Indianapolis-based WellPoint Inc. has donated nearly $12.8 million to help defeat a ballot initiative that would give California regulators power to reject increases in health policy premiums, according to Bloomberg News, citing data provided by the California-based research organization MapLight. Premiums for family medical coverage in California have increased 185 percent since 2002, with average monthly premiums for single coverage at $572 in 2013, compared with $490 nationally, according to a report released in January by California HealthCare Foundation, an Oakland-based not-for-profit. The ballot initiative would require insurers to disclose publicly and justify proposed rate changes that affect individual and small employer customers. It would also give the state insurance commissioner authority to reject increases. About 35 states, including Indiana, have authority to approve or deny rate changes, according to the National Association of Insurance Commissioners.
Eli Lilly and Co. saw little effect on its stock price after a jury in a federal court in Louisiana ordered Lilly to pay $3 billion in damages to patients who took the diabetes medicine Actos. That decision had no practical impact on Lilly because the maker of Actos, Japan-based Takeda Pharmaceutical Co., had agreed to indemnify Lilly against any legal damages. Lilly sold Actos for Takeda in the United States from 1999 until 2006. The jury ordered Actos to pay $6 billion in damages after finding that the drug companies hid the cancer risks of Actos. Takeda and Lilly said they would appeal the judgment. Even without a successful appeal, legal experts told Bloomberg News the $9 billion in damages is likely to be reduced because it is out of proportion to the documented damages in the case.
Ohio-based ViaQuest Inc. has acquired the Indiana operations of TriStar Home Health and Hospice, a division of Louisville-based Trilogy Health Services. The acquisition includes seven home health care branches in Evansville, Fowler, Huntingburg, Lafayette and Muncie, and two in Terre Haute. The locations operate under one of three brand names: Vibrant Home Health Care, Care One Homecare Services and Serenity Hospice. The locations employ a total of 180 people. Financial terms of the deal were not disclosed.
Five things I learned from the Medicare doctor payments
From this week’s historic data dump, I learned who the top 20 recipients of Medicare payments are in Indianapolis (hint: mostly labs, ambulances and eye surgeons). But the real takeaway is that meaningful price information about doctors is still a long way away.