Note: More details to come; changes are highlighted. Except where noted, and highlighted, no other section of this report has been updated.
Reason for Report: 4Q16 and FY16 Flash Update
Prev. Ed.: Dec 12, 2016; 3Q16 Earnings Update
Flash Update
4Q16 Earnings and Revenues Rise
4Q16 Results
Actelion reported 4Q16 earnings of CHF1.00 (excluding amortization of acquired intangible assets) per American Depository Receipt (ADR), up from the year-ago figure of CHF0.8.
All growth rates mentioned below are in constant exchange rates (CER) and on a y/y basis.
Revenues were up 20.7% y/y to CHF626.8 million in the fourth quarter.
Revenues of Opsumit increased 45% to CHF235 million.
Revenues of Tracleer decreased 17% to CHF229 million.
Full year 2016 Results
Actelion reported 2016 earnings of CHF5.9 (excluding amortization of acquired intangible assets) per ADR, up from the year-ago figure of CHF4.4.
Revenues were up 18.2% y/y to CHF24.1 billion in 2016.
MORE DETAILS WILL COME IN THE IMMINENT EDITIONS OF ZACKS RD REPORTS ON ALIOF.
Portfolio Manager Executive Summary
Actelion Ltd. is among the leading biopharmaceutical companies in Europe. It focuses on the discovery, development and commercialization of innovative drugs for diseases with significant unmet medical need. The company is a leader in the pulmonary arterial hypertension (PAH) market with key drugs like Opsumit, Tracleer, Ventavis, Veletri and Uptravi. Other drugs in its portfolio include Zavesca (progressive neurological manifestations in Niemann-Pick type C disease and oral treatment of type I Gaucher disease for patients unsuitable for enzyme replacement therapy) and Valchlor (topical treatment of early-stage (stage IA and IB) mycosis fungoides-type cutaneous T-cell lymphoma).
Of the two firms covering the stock, one firm assigned a positive rating while the other gave a negative rating on Actelion.
Positive outlook (1/2 firm): The bullish firm considers Opsumit to be the growth engine for the company. It is also positive on the prospects of Uptravi. The strong momentum for Uptravi’s launch should further boost growth prospects. The firm believes that Opsumit along with Uptravi should together drive a treatment paradigm shift in the PAH market as combination oral therapy is increasingly adopted, underscoring Actelion's blockbuster PAH franchise. The firm is also impressed with management’s efforts to boost shareholder value through increased dividends and ongoing share repurchases. The company’s upgrade in 2016 outlook is encouraging, indicating positive growth potential at Actelion.
Negative Outlook (1/2 firm): Broker report Not Available.
Dec 12, 2016
Overview
Actelion Ltd., a biopharmaceutical company, is a leading player in the research and development of drugs for treating diseases related to the endothelium. The company focuses on the discovery, development, and marketing of innovative drugs for significant unmet medical needs. It currently has seven drugs in its portfolio – Tracleer, an important front-line treatment for PAH to improve exercise ability; Ventavis for the treatment of PAH (WHO Group I); Uptravi for the treatment of PAH (in adult patients with WHO functional class (FC) II-III, either as combination therapy in patients insufficiently controlled with an endothelin receptor antagonist (ERA) and/or a phosphodiesterase type 5 (PDE-5) inhibitor, or as monotherapy in patients who are not candidates for these therapies), Zavesca for the treatment of progressive neurological manifestations in Niemann-Pick type C disease and oral treatment of type I Gaucher disease; Veletri for the treatment of moderate-to-severe PAH; Opsumit for the treatment of PAH (WHO Group I) to delay disease progression and Valchlor for the topical treatment of early-stage (stage IA and IB) mycosis fungoides-type cutaneous T-cell lymphoma. For more information, please visit the company website at www.actelion.com.
The firms identified the following factors for evaluating the investment merits of Actelion:
Key Positive Arguments / Key Negative ArgumentsActelion possesses a leading franchise in PAH, with drugs like Tracleer, Ventavis, Veletri and Opsumit. On Dec 21, 2015, the FDA approved Uptravi as an orally available selective IP prostacyclin receptor agonist. Actelion launched Uptravi in the U.S. on Jan 4, 2016. The initial uptake of the drug has been strong in the U.S. The drug was also approved in the EU in May. The launch of Uptravi has further strengthened the company’s portfolio. / Tracleer is facing competitive pressure. The drug lost patent protection in the U.S. and will lose exclusivity in the EU in early 2017 as well.
The company had a strong net cash position which should enable the company to make prudent investments and develop its pipeline. Moreover, this will help the company to boost shareholder value through increased share repurchases and dividends.
Note: The company’s fiscal year coincides with the calendar year.
Dec 12, 2016
Long-Term Growth
In 2012, Actelion outlined a three-step strategy to create value for shareholders. Firstly, the company will focus on ramping up its PAH franchise over the short term. Secondly, it will concentrate on building a second specialty franchise as a mid-term goal. Thirdly, it will undertake the steps required to improve overall profitability.
Actelion possesses a leading franchise in PAH, with four products (Opsumit, Tracleer, Ventavis and Veletri) being marketed for the treatment of the disease, all of which have delivered a significant value to patients. However, Tracleer lost patent protection in Nov 2015 in the U.S. and will lose the same in the EU by the end of Aug 2017 as well. Hence, the long-term outlook for Actelion depends on its ability to replace Tracleer, the significant revenue contributor, following its loss of patent exclusivity. To achieve this goal, the company developed Opsumit, which was approved in the U.S. in Oct 2013 for the treatment of PAH (WHO Group I) and delay disease progression. It also received marketing authorization in the EU in Dec 2013.
Meanwhile, on Dec 21, 2015, the FDA approved Uptravi as an orally available selective IP prostacyclin receptor agonist for the treatment of PAH. Consequently, Actelion launched Uptravi in the U.S. on Jan 4, 2016. The launch of Uptravi has further strengthened the company’s portfolio. Further, in May 2016, the drug was approved in the EU.
The second part of the strategy is to build an additional specialty franchise alongside PAH to fully utilize its expertise in differentiated commercial assets that the company can bring to market. Actelion will concentrate its efforts on orphan and specialty indications, which will lead to more targeted research and development spending. Actelion also intends to focus on building additional franchise externally by acquiring assets.
The company intends to expand its market share in 2016 with Veletri and Opsumit. However, the company expects that generic competition in Europe will increase further in 2016 which in turn will impact pricing and sales.
Dec 12, 2016
Rating DistributionPositive / 50.0%
Neutral / 0.0%
Negative / 50.0%
Avg. Target Price / NA
High / NA
Low / NA
No. of Analysts with Target price/Total / NA
Target Price/Valuation
Recent News
Actelion Misses 3Q Earnings, Beats Revenues, View Up – Oct 20
Actelion reported 3Q16 earnings of $2.10 per American Depository Receipt (ADR), up from the year-ago figure of $1.55. Reported earnings were, however, below the Zacks Consensus Estimate of $2.39.
Revenues were up 17.5% y/y to $620.9 million, beating the Zacks Consensus Estimate of $603.5 million.
Quarter in Detail
All growth rates mentioned below are in constant exchange rates (CER) and on a y/y basis.
Product sales were up 15%. Sales surged 18% in the U.S. driven by the launch of Uptravi, continued momentum in Opsumit and share gains in the ERA market. Sales in the EU were down 3%, while that in Japan soared 20% on the back of Opsumit, Veletri and Zavesca (Japanese trade name: Brazaves). Across the rest of the world, sales were up 29%.
Key growth drivers at Actelion include Opsumit and Tracleer. Opsumit generated revenues of CHF218 million, up 45% driven by continued uptake on the back of commercial availability in over 30 countries.
On the other hand, sales of Tracleer amounted to CHF244 million, down 18%. The decline was due to increasing demand for Opsumit, pricing pressure in the EU and stiff generic competition. On the other hand, Veletri and Valchlor recorded sales growth of a respective 2% and 8%.
Research & development expenses rose 17.1% to CHF122.6 million in 3Q16. Selling, general and administrative expenses were also up 5.6% to CHF174 million.
Pipeline Update
Actelion continues to progress with the candidates in its pipeline. In 3Q16, the company initiated a phase III study – POINT – on ponesimod under a Special Protocol Assessment (SPA) agreement with the FDA for patients with relapsing multiple sclerosis (RMS). Patients will be treated on top of Tecfidera, with either ponesimod or placebo. The primary objective is to determine whether add-on therapy reduces relapse frequency compared to placebo in patients with active RMS who are treated currently with Tecfidera.
Outlook
Actelion has revised its outlook for 2016. At CER, the company expects core operating income growth in the mid-teen percentage range (previous guidance: low-teen percentage range).
Revenue
The company reported total revenue of CHF611 million in 3Q16, up 17.5% y/y,driven by strong uptake of Uptravi in the U.S. and continued uptake of Opsumit.
Outlook: At CER, the company expects core operating income growth in the mid-teen percentage range (previous guidance: low-teen percentage range).
All growth rates mentioned below are on a Y/Y basis and at CER.
Specific Products
PAH Franchise
Tracleer (bosentan)
Indication: PAH
Product Life Cycle Status: Marketed
Sales: Tracleer sales in 3Q16 were CHF244 million, down 18% y/y due to higher demand for Opsumit. Sales were further impacted by continued pricing pressure in EU and increased generic competition for bosentan, particularly in Spain, along with order phasing/inventory adjustments in the U.S.
Competitors: Gilead’s Letairis, United Therapeutics’ Remodulin, Adcirca and Tyvaso.
Patent: Tracleer lost patent protection in Nov 2015 in the U.S. and expects to lose exclusivity by the end of Aug 2017 in the EU as well. It lost patent exclusivity in Canada, Brazil, Turkey and Poland in 2012.
Ventavis (iloprost)
Indication: Treatment of PAH (WHO Group 1) to improve a composite endpoint consisting of exercise tolerance, symptoms (NYHA Class) and lack of deterioration.
Product Life Cycle Status: Marketed
Sales: Ventavis sales were CHF15 million in 3Q16, down 40% y/y at CER. Competitive pressure, particularly related to the launch of Uptravi, continued to hit sales.
Competitors: United Therapeutics’ Tyvaso (treprostinil)
Veletri (epoprostenol injection)
Indication: Treatment of moderate-to-severe PAH and PAH associated with the scleroderma spectrum of disease.
Product Life Cycle Status: Marketed
Importance: Actelion’s formulation has the advantage of being stable at room temperature for a day when diluted and put into the pump for administration. This eliminates the need for ice packs.
Sales: Veletri sales in 3Q16 were CHF23 million, up 2% y/y. Sales continued to grow on the back of market penetration, successful launches in additional markets, and continued growth in Japan.
Competitors: GlaxoSmithKline’s Flolan and United Therapeutics’ Remodulin
Opsumit (macitentan)
Indication: PAH (WHO Group I) to delay disease progression (approved in the U.S., EU, Health Canada and Australia); digital ulcers associated with systemic sclerosis (approved in the EU)
Product Life Cycle Status: Marketed
Sales: Opsumit sales in 3Q16 were CHF218 million, up 45%. Strong growth in patients benefitting from Opsumit was driven by the referral of treatment-naïve patients, along with increased early combination with PDE-5 inhibitors. Sales benefited in Japan by a significant increase in new patient enrollment following the lifting of the two-week prescription limit in Jun 2016. At present, Opsumit is available in over 30 countries.
Additional Studies: Actelion is currently studying Opsumit in a phase III study – MAESTRO – for the treatment of patients suffering from Eisenmenger syndrome. In addition, the company has initiated a phase III study, TOMORROW, on the drug for the treatment of children with PAH. Moreover, Opsumit is being evaluated in a phase II study – MERIT – in patients with chronic thromboembolic pulmonary hypertension (CTEPH). Meanwhile, the company has completed a phase II study (MELODY) on the drug for the treatment of combined pre- and post-capillary pulmonary hypertension.
Uptravi (selexipag)
Indication: An orally available selective IP prostacyclin receptor agonist indicated for PAH.
Product Life Cycle Status: Marketed
Sales: Sales came in at CHF70 million. At the end of the quarter, the company had 1800 patients on treatment. In 3Q16, Uptravi was approved in Switzerland and Japan.
Partner: Nippon Shinyaku (Switzerland and Japan)
Specialty Products
Zavesca (miglustat)
Indication: Mild-to-moderate type I Gaucher disease, Niemann-Pick Type C (NP-C) disease
Product Life Cycle Status: Marketed in the U.S. and EU for mild-to-moderate type I Gaucher disease, marketed in the EU and Japan (under the trade name Brazaves) for NP-C disease
Sales: Zavesca sales in 3Q16 were CHF26 million, up 9% y/y. Sales in Europe declined 5% mainly due to the launch of generic miglustat (approved for the type 1 Gaucher disease indication only). Sales in Japan were up 16% on the back of increased patient demand in the Niemann-Pick type C indication. In the first nine months of 2016, patients on therapy increased 7% globally from the year-ago period, driven by a 16% increase in demand in the Niemann-Pick type C indication.
Valchlor (mechlorethamine)
Indication: Topical treatment of early-stage (stage IA and IB) mycosis fungoides-type cutaneous T-cell lymphoma
Product Life Cycle Status: Marketed in the U.S.
Sales: Valchlor sales in 3Q16 were up 8% y/y to CHF8 million. The company continues to make efforts to establish the drug in the U.S. for the treatment of patients with early-stage mycosis fungoides-type cutaneous T-cell lymphoma (MF-CTCL).
Valchlor (under the trade name Ledaga) is currently under review in the EU.
Pipeline Candidates
Ponesimod
Indication: RMS
Stage of Development: Phase III
Ongoing Studies: Ponesimod, an orally active, selective sphingosine-1-phosphate receptor1 (S1P1), is currently being evaluated in a phase III study (OPTIMUM) and in the double-blind long-term extension of a phase II study for the treatment of patients suffering from RMS. Both studies will evaluate the safety and efficacy of ponesimod in comparison to teriflunomide. Patient enrolment for the OPTIMUM study is expected to be complete around the end of 2016.