Novartis' canakinumab gets an FDA rejection, but it raises guidance anyway

Cell therapy, gene therapy and now radioactive therapy: Novartis is piecing together its path for future growth under new CEO Vas Narasimhan. (Novartis)

Novartis is raising its 2018 sales outlook, but canakinumab won’t help it hit the new target—at least not in the cardiovascular sales department.

The Swiss drugmaker said Thursday that the FDA had rejected canakinumab—already marketed as Ilaris for patients with rare inflammatory diseases—as a treatment for certain patients who have had a prior heart attack. The agency requested additional data on the responder population, executives said on the company's third-quarter conference call.

Prospects for canakinumab had been iffy since last August, when the prospect showed it could cut the risk of major CV events by 15% and cardiovascular death by 10%—figures that likely wouldn't prove "fully compelling to payers." But the Swiss drugmaker identified a subpopulation in which it could make a stronger case.

The regulatory setback wasn't the only bad news for Novartis on Thursday; its third-quarter sales also came in slightly below analyst expectations. But that didn't stop the pharma giant from dialing up its full-year sales outlook.

Unsurprisingly, generics unit Sandoz’s lag pulled back Novartis’ sales growth in the quarter by 6% at constant currencies to $12.78 billion, missing the consensus mark by less than 1%. But Novartis is now projecting sales to grow by a mid-single digit percentage, up from the previous low- to mid- single-digit rate.

Why the rosier outlook? Anti-inflammatory drug Cosentyx and heart failure treatment Entresto are delivering. For the third quarter, both drugs beat analyst expectations.

It wasn't all that long ago—think this year's first quarter—that Cosentyx came in significantly below estimates. Management in April blamed rebates the company had to offer to win prescriptions in previously untreated patients. Fast forward to Q3, and sales grew 37% year over year to reach $750 million. The drug also surpassed AbbVie best-seller Humira in total U.S. prescriptions in its psoriatic arthritis indication, CEO Vas Narasimhan said on the call.

The IL-17A inhibitor is up against some new competition of its own, though, such as Johnson & Johnson IL-23 inhibitor Tremfya. Looking to seal its lead, Novartis in May started a head-to-head trial against Tremfya in patients with psoriatic plaques resistant to J&J sister drug Stelara, with results expected to hit in 2019. In the meantime, Novartis last month unveiled five-year real-world evidence demonstrating Cosentyx’s ability to improve quality of life.

Entresto, meanwhile, has been performing well since 2017, and in the third quarter, sales again shot upward to $271 million, compared with the $239 million it posted in the second quarter. Recent data also showed the drug can be initiated safely in hospitalized patients shortly after an acute heart failure episode.

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Novartis is working reinvent itself as a “medicines company” under new leader Narasimhan. It's in the process of spinning off Alcon and just recently sold off a big chunk of struggling Sandoz to India’s Aurobindo Pharma, leaving behind only some complex generics and biosimilars. Earlier in the year, it sold its stake in its consumer health joint venture to partner GlaxoSmithKline, too. And it’s also embarking on a massive restructuring announced last month, which will see it slash its workforce by about 19%.

On the call, Narasimhan laid out a blueprint for the future. In cell therapy, the company has new CAR-T treatment Kymriah; in gene therapy, it just bought AveXis for $8.7 billion and gained control of its lead candidate, spinal muscular atrophy therapy AVXS-101.

And on Thursday, Novartis boosted its bet on radioactive therapy with a $2.1 billion deal agreement for Endocyte. That buy will build on Novartis’ existing radiopharma business from Lutathera, approved for a type of cancer that affects the pancreas or gastrointestinal tract.

In what Narasimhan described as a strong launch with “blockbuster potential,” Lutathera has been given to over 1,100 patients in the U.S. since its FDA approval late January, with sales climbing to $56 million in the third quarter.