Tag: Biotech and Pharmaceuticals

Walgreens tops quarterly revenue estimates, but narrows profit outlook in ‘challenging’ economy

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A person rides past a Walgreens truck, owned by the Walgreens Boots Alliance, Inc., in Manhattan, New York City, U.S., November 26, 2021. 

Andrew Kelly | Reuters

Walgreens on Thursday reported fiscal second-quarter sales that beat Wall Street’s expectations, but lowered the high end of its full-year adjusted earnings outlook in part due to a “challenging” retail environment in the U.S.

The company also posted a steep net loss for the quarter as it recorded a hefty nearly $6 billion charge related to the decline in value of its investment in primary-care provider VillageMD. Walgreens has closed 140 VillageMD clinics amid financial woes for the business, which it sees as critical to its ongoing push to transform from a major drugstore chain into a large health-care company.

But Walgreens does not believe the VillageMD charge “will have a significant impact on our financial position, or our ability to invest across businesses going forward,” Walgreens global CFO Manmohan Mahajan said during an earnings call Thursday.

The results come as Walgreens’ new CEO, Tim Wentworth, works to slash costs and steer the company out of a rough spot with a slate of new executives. Shares of Walgreens fell 30% last year as the company faced weakening demand for Covid products, low pharmacy reimbursement rates, an unsteady push into health care and a challenging macroeconomic environment. 

In a release Thursday, the company said it is confident it will meet its goal of saving $1 billion during fiscal 2024 through its ongoing cost-cutting program. Walgreens has laid off employees, closed unprofitable stores and used artificial intelligence to make its supply chain more efficient, among other efforts.

Here’s what Walgreens reported for the quarter, compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $1.20 adjusted vs. 82 cents expected
  • Revenue: $37.05 billion vs. $35.86 billion expected

Walgreens narrowed its fiscal 2024 adjusted earnings guidance to between $3.20 and $3.35 per share. That compares with the company’s previous outlook of $3.20 to $3.50 per share. Analysts surveyed by LSEG expect full-year adjusted earnings of $3.24 per share.

Walgreens said the new guidance reflects the hurdles facing retailers in the U.S. and an early wind-down of its sales-leaseback program. It also takes into account lower earnings due to Walgreens’ forward sale of shares of drug distributor Cencora, formerly known as AmerisourceBergen.

The company said a stronger performance in its pharmacy services segment and a lower adjusted effective tax rate helped to offset the factors dragging on its earnings. 

But Mahajan said Walgreens expects the current economic backdrop will “continue to negatively impact our U.S. retail sales in the short term.”

Wentworth noted on the call that the company is “exploring innovative ways to boost profitability and growth” in its retail pharmacy division, such as through new pharmacy reimbursement models.

The company did not give a new revenue forecast for the fiscal year. Walgreens has not provided that guidance since October, when it said it sees $141 billion to $145 billion in sales. 

The company reported a net loss of $5.91 billion, or $6.85 per share, for the quarter. That compares with a net income of $703 million, or 81 cents per share, for the same period a year ago. a

Excluding certain items, including the $5.8 billion non-cash charge related VillageMD, adjusted earnings per share were $1.20 for the quarter.

The company booked sales of $37.05 billion in the quarter, a roughly 6% jump from the same period a year ago. 

Walgreens sees growth across all divisions

The company said that increase reflects sales growth across its three business segments. But Walgreens’ U.S. health-care division stood out as sales jumped about 33% in the fiscal second quarter compared with the same period a year ago. 

Revenue for the segment came in at $2.18 billion.

The company said the higher sales reflect VillageMD’s acquisition of multispecialty care provider Summit Health and growth across all businesses in the segment on a pro-forma basis.

VillageMD sales grew 20% due to same-clinic growth, among other factors. Sales from the segment’s specialty pharmacy company, Shields Health Solutions, grew 13%, due to new contracts and expansions of current partnerships.

Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.

Walgreens and VillageMD

Source: Walgreens

Meanwhile, Walgreens’ U.S. retail pharmacy segment generated $28.86 billion in sales in the fiscal second quarter, an increase of almost 5% from the same period last year.

That segment operates more than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs as well as health and wellness, beauty, personal care, and food products. 

Walgreens said pharmacy sales for the quarter rose 8.2% compared with the year-ago quarter. Comparable sales climbed 8.7% due to price inflation in brand medications and “strong execution” in pharmacy services, largely driven by the company’s vaccine portfolio.

Total prescriptions filled in the quarter including immunizations totaled 305.7 million, a more than 2% increase from the same period a year ago. 

Retail sales for the quarter fell 4.5% from the prior-year quarter, and comparable retail sales declined 4.3%. The company pointed to a challenging retail environment and a weaker respiratory season, among other factors. 

Walgreens’ international segment, which operates more than 3,000 retail stores abroad, posted $6.02 billion in sales in the fiscal second quarter. That’s an increase of more than 6% from the year-ago period. 

The company said sales from its U.K. subsidiary, Boots, grew 3%.

When asked on the call about Eli Lilly‘s new direct-to-consumer website aimed at expanding access to its weight loss drug Zepbound, Wentworth did not comment on the program specifically.

But he noted that the company is a “natural partner” for pharmaceutical companies that may “want to go directly to patients for a particular product, where the normal supply chain, reimbursement model, et cetera isn’t working effectively.”

As an example, Wenworth pointed to GLP-1s, a new class of weight loss and diabetes drugs that includes Zepbound. Those drugs must be taken chronically but carry hefty price tags, which can be a hurdle for both patients and insurance plans and other payers.

Walgreens is “uniquely positioned” to distribute drugs and serve as a “clinically aligned partner” that can help patients navigate their treatment safely, according to Wentworth.

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Biogen revenue and profit shrink on Aduhelm costs, slumping sales of multiple sclerosis therapies

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A Biogen facility in Cambridge, Massachusetts.

Brian Snyder | Reuters

Biogen on Tuesday reported fourth-quarter revenue and profit that shrank from a year ago, as it recorded charges related to dropping its controversial Alzheimer’s drug Aduhelm and as sales slumped in its multiple sclerosis therapies, the company’s biggest drug category.

Biogen booked sales of $2.39 billion for the quarter, down 6% from the same period a year ago. It reported net income of $249.7 million, or $1.71 per share, for the fourth quarter, down from net income of $550.4 million, or $3.79 per share, for the same period a year ago. Adjusting for one-time items, the company reported $2.95 per share.

The drugmaker’s fourth-quarter earnings per share, both unadjusted and adjusted, saw a negative impact of 35 cents associated with previously disclosed costs of pulling Aduhelm, which had a polarizing approval and rollout in the U.S.

Biogen is cutting costs while pinning its hopes on its other Alzheimer’s drugs, including its closely watched treatment Leqembi, and other newly launched products to replace declining revenue from its multiple sclerosis therapies.

Shares of Biogen closed more than 7% lower on Tuesday.

Here’s what Biogen reported for the fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv: 

  • Earnings per share: $2.95 adjusted vs. $3.18 expected
  • Revenue: $2.39 billion vs. $2.47 billion expected

Also on Tuesday, Biogen issued full-year 2024 guidance that calls for adjusted earnings of $15 to $16 per share. Analysts surveyed by LSEG had expected full-year earnings guidance of $15.65 per share.

The drugmaker said it expects 2024 sales to decline by a low to mid-single digit percentage compared with last year. But the company anticipates its pharmaceutical revenue, which includes product revenue and its 50% share of Leqembi sales, to be flat this year compared with 2023.

Multiple sclerosis drug sales slump

Biogen’s fourth-quarter revenue from multiple sclerosis products fell 8% to $1.17 billion as some of the therapies face competition from cheaper generics.

The company’s once-blockbuster drug Tecfidera, which is facing competition from a generic rival, posted revenue that fell 17.8% to $244.3 million in the fourth quarter. Analysts had expected that drug to book sales of $233.1 million, according to FactSet.

Vumerity, an oral medication for relapsing forms of multiple sclerosis, generated $156.4 million in sales. That came in below analysts’ estimates of $174.4 million, FactSet estimates said. 

“We’ve had several years of declining revenue and profit, which is not unusual when you’re dealing with patent expirations,” Biogen CEO Christopher Viehbacher told reporters on a media call Tuesday. He added that one of the key ways Biogen will return to growth is to “reposition the company away from our legacy franchise of multiple sclerosis towards new products.”

Meanwhile, Biogen’s rare disease drugs recorded $471.8 million in sales, up 3% from the same period a year ago. 

Spinraza, a medication used to treat a rare neuromuscular disorder called spinal muscular atrophy, recorded $412.6 million in sales. That came under analysts’ estimate of $443.4 million in revenue, according to FactSet. 

Biogen’s biosimilar drugs booked $188.2 million in sales, up 8% from the year-earlier period. Analysts had expected sales of $196.7 million from those medicines.

Leqembi, other new drugs

The results come amid the rollout of Biogen and Eisai’s Leqembi, which became the first drug found to slow the progression of Alzheimer’s disease to win approval in the U.S. in July.

Eisai, which reported earnings last week, recorded $7 million in fourth-quarter revenue and $10 million in full-year sales from Leqembi.

Biogen CEO Viehbacher told reporters on the media call Tuesday that there are around 2,000 patients currently on Leqembi. That makes Biogen’s target of 10,000 patients by the end of March 2024 look increasingly difficult to hit, but Viehbacher emphasized that the company is focused more on the long-term reach of Leqembi rather than meeting that benchmark. 

“I think what’s important is we are now making progress,” he told reporters. “The 10,000 isn’t really hard and I think we are now really focusing on commercial plans — how do we get to the next 100,000?”

Notably, the low rate of adoption isn’t due to lack of demand: There are some 8,000 U.S. patients currently waiting to get on treatment, executives from Eisai said on an earnings call last week. 

More CNBC health coverage

The companies are also working toward Food and Drug Administration approval of an injectable version of Leqembi, which showed promising initial results in a clinical trial in October. 

Leqembi is currently administered twice monthly through the veins, a method known as intravenous infusion. The injectable form would be a new and more convenient option for administering the antibody treatment to patients, which could pave the way for higher uptake. 

But investors also have their eyes on other newly launched drugs. 

That includes Skyclarys from Biogen’s acquisition of Reata Pharmaceuticals in July. That drug brought in $56 million in fourth-quarter revenue, according to Biogen.

The FDA cleared Skyclarys last year, making it the first approved treatment for Friedreich ataxia, a rare inherited degenerative disease that can impair walking and coordination in children as young as 5.

On Monday, European Union regulators approved Skyclarys for the treatment of Friedreich ataxia in patients ages 16 and up. 

Biogen has also partnered with Sage Therapeutics on the first pill for postpartum depression, which won FDA approval in August. But the agency declined to clear the drug for major depressive disorder, which is a far larger commercial opportunity. 

Biogen said that pill, called Zurzuvae, generated roughly $2 million in sales for the fourth-quarter.

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Why oil is down since the Hamas-Israel conflict started and whether that can last

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Weight loss drugs boost sales at retail pharmacies, but they may not help profits much

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A pharmacist displays boxes of Ozempic, a semaglutide injection drug used for treating type 2 diabetes made by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, U.S. March 29, 2023. 

George Frey | Reuters

Drugmakers aren’t the only ones feeling the impact of the weight loss industry gold rush. 

Retailers with pharmacy businesses, such as Walmart, Kroger and Rite Aid, said increased demand for prescription weight loss drugs helped boost sales for the second quarter. 

But analysts note that those blockbuster treatments are minimally profitable for retail pharmacies – and may even come with margin headwinds.

“More recently, you’re starting to hear retailers talk about these drugs. But I wouldn’t say they’re necessarily beneficiaries of the increased popularity,” Arun Sundaram, an analyst at CFRA Research, told CNBC. “They’re really not making much of a profit on the drugs. So it’s really just a traffic driver and not really a profit pool for retailers.” 

Buzzy drugs like Novo Nordisk‘s obesity injection Wegovy and diabetes treatment Ozempic have skyrocketed in popularity over the last year, with high-profile names like billionaire tech mogul Elon Musk among recent users.

Those treatments are known as GLP-1s, a class of drugs that mimic a hormone produced in the gut to suppress a person’s appetite. 

Other drugmakers, such as Eli Lilly and Pfizer, are developing their own GLP-1s in a bid to capitalize on a weight loss drug market that some analysts project could be worth $200 billion by 2030. An estimated 40% of U.S. adults are obese, making successful treatments a massive opportunity for drugmakers. 

But the boom in demand for GLP-1s is also being felt in other parts of the drug supply chain, including the pharmacies that dispense the prescription drugs to patients. 

Are weight loss drugs profitable? 

On an earnings call Thursday, Walmart CEO Doug McMillon said the company expects weight loss drugs to help drive sales for the rest of the year: “We still expect food, consumables, and health and wellness, primarily due to the popularity of some GLP-1 drugs, to grow as a percent total in the back half.” 

In June, likewise, Rite Aid CFO Matthew Schroeder said a jump in pharmacy revenue and the company’s decision to hike its full-year revenue guidance was “due to the increase in sales volume in Ozempic and other high-dollar GLP-1s.” Schroeder was referring to the hefty price tags of GLP-1s, which range from around $900 to $1,300 in the U.S. 

He said those drugs have high sales amounts per prescription, but emphasized that the increased volume of GLP-1s has a “minimal impact” on Rite Aid’s gross profit. 

Kroger CEO Rodney McMullen similarly said during an earnings call in June that GLP-1 drug “sales dollars are a lot bigger than the margin dollars.” 

“We would expect the GLP-1 type drugs to continue but remember, the impact on profitability is pretty narrow,” he said.

That’s because GLP-1s like Wegovy and Ozempic are branded drugs with “very, very low gross margins,” according to CFRA Research’s Sundaram. 

He said retail pharmacies generate high sales for each GLP-1 prescription they dispense but rake in low profits, which is having a slight negative impact on the overall gross margins of retailers like Walmart and Kroger. 

UBS analyst Michael Lasser similarly highlighted in a recent note that gross margins for Walmart’s U.S. business “would have looked even better had it not been for the contribution of the GLP-1 drugs since these carry very low profit rates.”

A selection of injector pens for the Saxenda weight loss drug are shown in this photo illustration in Chicago, Illinois, U.S., March 31, 2023. 

Jim Vondruska | Reuters

Gross margins for branded medications are 3.5% on average for pharmacies, according to a 2017 study from USC’s Schaeffer Center for Health Policy and Economics. That suggests it may take years before a branded drug significantly contributes to a pharmacy’s bottom line.

In contrast, gross margins for generic drugs – the cheaper equivalents of branded medications – are 42.7% on average for pharmacies. 

There are several reasons for the lower margins of branded drugs. For one, branded drugs don’t directly compete with other medications because they have patent protections. That gives drug manufacturers more power when they negotiate drug discounts with wholesalers, which purchase medications and distribute them to pharmacies. 

As a result, there is “little room for wholesalers and pharmacies to capture large margins due to their relative lack of negotiating power,” according to the Association for Accessible Medicines, a trade association representing the manufacturers and distributors of generic prescription drugs. 

What other impacts do retailers face?

But there are also other impacts of GLP-1s to consider beyond a retailer’s pharmacy business.

For companies like Walmart and Kroger, GLP-1 drugs may be indirectly impacting other business categories in a positive way.

That makes some analysts less worried about margin headwinds in pharmacy: “The gross margin headwind is less of a risk overall for Walmart because any footstep in the door often ends up with multiple items in a basket,” KeyBanc analyst Bradley Thomas told CNBC. 

“Walmart is generally not a quick store that you just pop in on the way home,” he said. “They’re going to make multiple purchases, and I think we’re seeing a lot of discretionary categories actually see a lift from some of this incremental traffic they’ve been getting lately.” 

Thomas added that GLP-1 drugs only fall under one part of Walmart’s business: “If you’re listing off the most important things that are driving Walmart’s strong sales performance right now, it’s probably not making the top 10,” he said. 

It’s a slightly different situation for Rite-Aid and similar companies like CVS Health and Walgreens.

Those companies have retail pharmacies but also other business segments that are directly affected in different ways by the boom in GLP-1 drugs.

For example, CVS also operates a health insurer and pharmacy benefit manager, or PBM, which maintains formularies and negotiates drug discounts with manufacturers on behalf of insurers and large employers.

The increased demand for GLP-1 drugs is likely more of a headwind for health insurers since they have to cover the costly drugs for beneficiaries, but CVS says “the risk is manageable” in that business division.

Meanwhile, PBMs may benefit more from the increase in GLP-1 use since they negotiate significant discounts on drugs and drive competition between manufacturers – but they often don’t pass along all of the savings to insurers.

“Each of the businesses kind of has GLP-1 in them and they are impacting them in a variety of different ways,” CVS CEO Karen Lynch said during an earnings call last month.

Correction: The Association for Accessible Medicines is a trade association representing the manufacturers and distributors of generic prescription drugs. An earlier version misstated its name.

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Jim Cramer’s top 10 things to watch in the stock market Monday

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My top 10 things to watch Monday, August 14

1. It’s a big week of retail earnings. Is Target (TGT) undervalued? Is Walmart (WMT) overvalued? Is Club name TJX Companies (TJX) going to start with its usual up two points and then cascade down two? That’s what you need to be ready for. TJX and Target report second-quarter results on Wednesday, while Walmart reports on Thursday.

2. Morgan Stanly on Monday names Club holding Nvidia (NVDA) a top pick, while predicting a beat and raise when the company reports second-quarter results on Aug. 23. But I really want to warn people that I don’t think it’s ready to be bought.

3. Mizuho on Monday raises its price target on Amgen (AMGN), a very low-risk pharmaceuticals company, to $223 a share from $214, while maintaining a neutral rating on the stock. Elsewhere, Jefferies raises its price target on Amgen to $310 a share, up from $275, and reiterates a buy rating.

4. U.S. Steel (X) rejects an unsolicited takeover bid from rival Cleveland-Cliffs (CLF) that would have valued the former at roughly $7 billion. Cliffs is willing to buy anything. But why would the Federal Trade Commission ever allow this? U.S. Steel said Sunday it’s reviewing its strategic options.

5. Citigroup on Monday downgrades Urban Outfitters (URBN) to neutral from buy ahead of the clothing retailer’s second-quarter earnings on Aug. 22, while raising its price target to $40 a share, up from $36. The firm expects URBN to deliver an earnings beat, but thinks market expectations are too high going into the print. I like this company and find this downgrade disturbing.

6. Following a red-hot initial public offering last month, Morgan Stanley on Monday initiates coverage on beauty-and-wellness company Oddity Tech (ODD) with the equivalent of a hold rating and $57-a-share price target. The bank cites “strong long-term revenue growth prospects” for Oddity, but thinks the positives are already priced into the stock’s valuation.

7. Bernstein on Monday downgrades hotel chain Marriott International (MAR) to market perform, or neutral, from outperform, arguing the stock’s short-term upside is limited by its increased valuation this year and a slowdown in the U.S. luxury space. But the firm increases its price target on Marriott to $218 a share, up from $204.

8. Mizuho on Monday raises its price target on restaurant-management-software firm Toast (TOST) to $30 a share, up from $27, while maintaining a buy rating on the stock, following its “very strong” second-quarter results. Baird, conversely, designated Toast a “bearish fresh pick” following its big run of late. The firm has a neutral rating on the stock, with a price target of $25 a share.

9. China’s Country Garden, the country’s largest private real-estate developer, suspends trading of its onshore bonds on Monday, in a sign it could soon move to restructure its debt. Shares are down roughly 17%, weighing heavily on Hong Kong’s Hang Seng Index. The news is the latest sign Beijing will likely need to step in to shore up China’s beleaguered real-estate sector.

10. Piper Sandler on Monday raises its price target on Club name Coterra Energy (CTRA) to overweight, or buy, from neutral, on expectations for “strong execution across the portfolio.” The bank increases its price target on the oil-and-gas firm to $35 a share, up from $30.

And remember to tune into the Club’s Monthly Meeting on Thursday at 12:00 p.m. ET.

(See here for a full list of the stocks at Jim Cramer’s Charitable Trust.)

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

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FDA approves Alzheimer’s drug Leqembi, paving way for broader Medicare coverage

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The Food and Drug Administration on Thursday fully approved the Alzheimer’s treatment Leqembi, a pivotal decision that will expand access to the expensive drug for older Americans.

Medicare announced shortly after the FDA approval that it is now covering the antibody treatment for patients enrolled in the insurance program for seniors, though several conditions apply.

Leqembi is the first Alzheimer’s antibody treatment to receive full FDA approval. It is also the first such drug to receive broad coverage through Medicare.

Leqembi is not a cure. The treatment slowed cognitive decline from early Alzheimer’s disease by 27% over 18 months during Eisai’s clinical trial. The antibody, administered twice monthly through intravenous infusion, targets a protein called amyloid that is associated with Alzheimer’s disease.

Medicare coverage is a crucial step to help older Americans with early Alzheimer’s disease pay for the treatment. With a median income of about $30,000, most people on Medicare cannot afford the $26,500 annual price of Leqembi set by Eisai without insurance coverage.

Medicare had previously only agreed to cover Leqembi for patients participating in clinical trials after the treatment received expedited approval in January. This policy had severely restricted access to the drug.

To be eligible for coverage, patients must be enrolled in Medicare, diagnosed with mild cognitive impairment or mild Alzheimer’s disease, and have a doctor who is participating in a data-collection system the federal government has established to monitor the treatment’s benefits and risks.

Joanna Pike, president of the Alzheimer’s Association, the lobby group that advocates on behalf of people living with the disease, said although Leqembi is not a cure, it will help patients in the early stages of the disease maintain their independence, conduct their daily lives, and spend more time with their families.

“This gives people more months of recognizing their spouse, children and grandchildren,” Pike said in a statement Thursday. “This also means more time for a person to drive safely, accurately and promptly take care of family finances, and participate fully in hobbies and interests.”

But the treatment carries serious risks of brain swelling and bleeding. Three patients who participated in Eisai’s study died. FDA scientists have said it is unclear if Leqembi played a role in these deaths.

Alzheimer’s disease is the most common cause of dementia among older adults and the sixth leading cause of death in the U.S., according to the FDA.

Dr. David Knopman, a neurologist who specializes in Alzheimer’s disease at the Mayo Clinic in Minnesota, said Leqembi clearly demonstrated a benefit to patients in Eisai’s trial, though he cautioned the efficacy of the treatment was modest.

Knopman said appropriately diagnosed and informed patients should be able to decide for themselves whether they want to take Leqembi after weighing the benefits and risks of the treatment as well as the potential logistical challenges of finding a place to receive the twice-monthly infusions.

Medicare coverage

To receive coverage, Medicare is requiring patients to find a health-care provider participating in a registry system that collects real-world data on the drug’s benefits and risks. The system is controversial. The Alzheimer’s Association and some members of Congress are worried this requirement will create barriers to treatment.

There are concerns that the number of health-care providers participating in such registries will be limited, and that people in rural towns and other underserved communities will have to travel long hours to find such a provider.

The Centers for Medicare and Medicaid Services has set up a nationwide portal to make it easy for health-care providers to submit the required data on patients receiving Leqembi. The free-to-use portal went live moments after the FDA decision on Thursday.

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Rep. Anna Eshoo of California, the ranking Democrat on the House Subcommittee on Health, and Rep. Nanette Barragan, D-Calif., raised concerns in a letter to CMS last month that patients could struggle to find a doctor participating in the system.

Alzheimer’s is typically diagnosed with the help of a PET scan to detect the amyloid protein associated with the disease or in some cases with a spinal tap. Medicare currently only covers one PET scan per lifetime for dementia. It is unclear if the program plans to change that policy.

There’s also concern that there could be too few specialist physicians and locations to administer the infusions if Leqembi is broadly embraced as a treatment and patient demand for the antibody is high.

Some studies have estimated that wait times for antibody treatments like Leqembi could range from months to even years over the next decade depending on demand.

Tomas Philipson, who advised the FDA commissioner and CMS administrator during the second Bush administration, said the registry is an unnecessary hurdle and Medicare should drop it, but he doesn’t believe the requirement will create an insurmountable barrier to patients accessing Leqembi.

If demand for Leqembi is high, doctors will have an incentive to participate in the registry and the drug companies will want to help, said Philipson, an expert on health-care economics at the University of Chicago.

How high demand will be for Leqembi is uncertain, he said. Families worried about the serious side effects may opt not to take the treatment, while others will decide the benefits outweigh those risks, he said.

High cost

Leqembi’s price tag and the treatment’s benefit-risk profile are controversial.

Medicare patients treated with Leqembi will pay 20% of the medical bill after they meet their Part B deductible, according to CMS. Costs may vary depending on whether the patient has supplemental Medicare coverage or other secondary insurance, according to the agency.

Patients could face up to $6,600 in annual out-of-pocket costs for Leqembi even with Medicare coverage, according to a study published in the journal JAMA Internal Medicine. The treatment could cost Medicare up to $5 billion a year depending on how many people receive the infusions, the study estimated.

Sen. Bernie Sanders, I-Vt., chair of the Senate Health Committee, has called Leqembi’s price “unconscionable” and in a letter last month asked Health and Human Services Secretary Xavier Becerra to take action to reduce the cost.

Sanders said patient out-of-pocket costs for Leqembi would amount to a sixth of many seniors’ total annual income and noted the high cost of the treatment could increase premiums for everyone on Medicare.

Eisai says its $26,500 annual list price for Leqembi is lower than the company’s estimate of $37,600 for the total value of the treatment for each patient. The Institute for Clinical and Economic Review, a nonprofit that analyzes health-care costs, estimated in April it should be priced at $8,900 to $21,500 per year.

Though Leqembi could prove costly to Medicare, Philipson said delaying coverage of the treatment would result in significant increased health-care spending as people with mild Alzheimer’s disease, which can be managed at home, progress to more serious disease that requires expensive nursing home care.

Philipson and his colleagues at the University of Chicago estimated that delaying Medicare coverage of Alzheimer’s antibody treatments by one year would result in $6.8 billion in increased spending. By 2040, health-care spending would rise by $248 billion.

Clinical benefit

Thursday’s full FDA approval comes after a panel of six outside advisors voted unanimously in June in support of the drug’s clinical benefit to patients. The panel was unusually small because some members recused themselves due to conflicts of interest.

The American Academy of Neurology stated in a February letter to CMS that there is a consensus among its experts that Eisai’s clinical trial of Leqembi was well designed and the results were “clinically and statistically significant.”

Some nonprofit groups such as Public Citizen, a consumer advocacy organization, strongly opposed FDA approval of Leqembi. A representative from Public Citizen told the advisory panel that the evidence for the drug’s benefit does not outweigh significant risks of brain swelling and bleeding.

And representatives from the National Center for Health Research and Doctors for America, also nonprofits, told the panel that Eisai’s clinical trial did not include enough Black patients, who are at higher risk for Alzheimer’s disease.

Leqembi has technically been approved for the U.S. market since January, when the FDA cleared the treatment under an accelerated pathway. The FDA uses expedited approvals to save time and get drugs to patients suffering from serious diseases more quickly.

But Medicare refused to cover the Leqembi at that time, asking for more evidence that the expensive treatment had a real clinical benefit for patients that outweighed the risks.

The program’s cautious coverage policy stems from the FDA’s controversial 2021 approval of another Alzheimer’s antibody treatment called Aduhelm, also made by Eisai and Biogen.

The FDA’s advisory committee declined to endorse Aduhelm because the data did not support a clinical benefit to patients. Three advisors resigned after the agency’s decision to approve the treatment anyway.

Knopman is one of the advisors who resigned over the FDA’s decision on Aduhelm. He said the data for Leqembi is different. Eisai conducted a clean trial that showed the antibody had a modest clinical benefit for patients, Knopman said.

An investigation by Congress subsequently found that the FDA’s approval of Aduhelm was “rife with irregularities.”

Sanders, in his letter to Becerra, said the FDA “has a special responsibility to restore the public trust after its inappropriate relationship with Biogen during the agency’s review of a prior Alzheimer’s drug, Aduhelm.”

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FDA advisors recommend that new Covid vaccines target an omicron XBB variant this fall

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A woman receives a booster dose of the Moderna coronavirus disease (COVID-19) vaccine at a vaccination centre in Antwerp, Belgium, February 1, 2022.

Johanna Geron | Reuters

The U.S. Food and Drug Administration‘s independent panel of advisors on Thursday recommended that updated Covid shots for the fall and winter target one of the XBB variants, which are now the dominant strains of the virus nationwide. 

The committee unanimously voted that the new jabs should be monovalent — meaning they are designed to protect against one variant of Covid — and target a member of the XBB family.

Those strains of Covid are descendants of the omicron variant, which caused cases to surge to record levels early last year. They are some of the most immune-evasive strains to date.

Advisors also generally agreed that the new shots should specifically target a variant called XBB.1.5. The panel only discussed that specific strain selection and did not vote on the matter.

XBB.1.5 accounted for nearly 40% of all Covid cases in the U.S. as of early June, according to data from the Centers for Disease Control and Prevention. That proportion is slowly declining, and cases of the related XBB.1.16 and XBB.2.3 variants are on the rise. 

Advisors noted that XBB.1.5 appears most ideal for the fall since vaccine manufacturers Pfizer, Moderna and Novavax have already started to develop jabs targeting the strain.

“The 1.5 looks good. It seems like it’s the most feasible to get across the finish line early without resulting in delays and availability,” said Dr. Melinda Wharton, a senior official at the National Center for Immunization and Respiratory Diseases. “The vaccine we can use is the vaccine that we can get. And so it feels like this would be a good choice.”

The FDA typically follows the advice of its advisory committees, but is not required to do so. It’s unclear when the agency will make a final decision on strain selection.

There is also uncertainty about which age groups the FDA and CDC will advise to receive the updated shots this fall.

But the panel’s recommendation is already a win for Pfizer, Moderna and Novavax — all of which have been conducting early trials on their respective XBB.1.5 shots ahead of the meeting.

“Novavax expects to be ready for the commercial delivery of a protein-based monovalent XBB COVID vaccine this fall in line with today’s [advisory committee] recommendation,” said John Jacobs, the company’s president and CEO.

The U.S. is expected to shift vaccine distribution to the private sector this fall. That means the vaccine makers will start selling their new Covid products directly to health-care providers and vie for commercial market share. 

The panel’s recommendation coincides with a broader shift in how the pandemic impacts the country and the world at large. 

Covid cases and deaths have dropped to new lows, governments have rolled back stringent health mandates like masking and social distancing and many people believe the pandemic is over altogether.  

But Dr. Peter Marks, head of the FDA’s vaccine division, said the agency is concerned that the U.S. will have another Covid wave “during a time when the virus has further evolved, immunity of the population has waned further and we move indoors for wintertime.”

Updated Covid vaccines that are periodically updated to target a high circulating variant will restore protective immunity against the virus, said Dr. David Kaslow, a senior official in the FDA’s vaccine division. 

It’s a similar approach to how the strains are selected for the annual flu shot. Researchers assess strains of the virus in circulation and estimate which will be the most prevalent during the upcoming fall and winter.

But it’s unclear how many Americans will roll up their sleeves to take the updated shots later this year. 

Only about 17% of the U.S. population — around 56 million people —have received Pfizer and Moderna’s boosters since they were approved in September, according to the CDC.

More than 40% of adults 65 and older have been boosted with those shots, while the rate among younger adults and children ranges between 18% and 20%.

Those boosters were bivalent, meaning they targeted the original strain of Covid and the omicron subvariants BA.4 and BA.5. 

Pfizer, Moderna and Novavax shot data

During the meeting, Pfizer, Moderna and Novavax presented preliminary data on updated versions of their shots designed to target XBB variants. 

Moderna has been evaluating shots targeting XBB.1.5 and XBB.1.16 — another transmissible omicron descendant, according to Rituparna Das, the company’s vice president of Covid vaccines. 

Preclinical trial data on mice suggests that a monovalent vaccine targeting XBB.1.5 produces a more robust immune response against the currently circulating XBB variants than the authorized bivalent shot targeting BA.4 and BA.5, according to Das. 

She added that clinical trial data on more than 100 people similarly demonstrates that the monovalent XBB.1.5 vaccine produces protective antibodies against all XBB variants. All trial participants had previously received four Covid vaccine doses.

Das said that comprehensive protection against XBB strains is likely due to the fewer unique mutations between the variants, which means their composition is similar.

There are only three unique mutations between the variants XBB.1.5 and XBB.1.16, according to Darin Edwards, Moderna’s Covid vaccine program leader. By comparison, there are 28 mutations between omicron BA.4 and BA.5.

That means the immune response an updated shot produces against XBB variants will likely be similar, regardless of which specific variant it targets, Edwards said.

Pfizer also presented early trial data indicating that a monovalent vaccine targeting an XBB variant offers improved immune responses against the XBB family. 

The company provided specific timelines for delivering an updated vaccine, depending on the strain the FDA selects. 

Pfizer will be able to deliver a monovalent shot targeting XBB.1.5 by July and a jab targeting XBB.1.16 by August, according to Kena Swanson, the company’s senior principal scientist.

Pfizer won’t be able to distribute a new shot until October if the FDA chooses a completely different strain, Swanson said.

Novavax did not provide a specific timeline for delivering a shot targeting XBB.1.5, but noted that an XBB.1.16 shot would take eight weeks longer.

Novavax unveiled preclinical trial data indicating that monovalent vaccines targeting XBB.1.5 and XBB.1.16 induce higher immune responses to XBB subvariants than bivalent vaccines do. 

Data also demonstrates that an XBB.1.5 shot produces antibodies that block XBB.2.3 from binding to and infecting human cells, according to Dr. Filip Dubovsky, Novavax’s chief medical officer.

Dubovsky said the trial results support the use of a monovalent XBB.1.5 shot in the fall.

Novavax’s jab uses protein-based technology, a decades-old method for fighting viruses used in routine vaccinations against hepatitis B and shingles.

The vaccine works differently than Pfizer’s and Moderna’s messenger RNA vaccines but achieves the same outcome: teaching your body how to fight Covid.

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Google’s ex-CEO Eric Schmidt tapped for federal biotech commission that allows members to keep biotech investments

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On Dec. 30, leaders of the House and Senate Armed Services committees announced the selection of former Google CEO Eric Schmidt and 11 others to serve on a new federal commission on biotechnology.

Tasked with reviewing the biotech industry and suggesting investments that would benefit U.S. security, the National Security Commission on Emerging Biotechnology is expected to have a prominent voice on policy and federal spending in the cutting-edge industry.

The appointment, however, doesn’t require commission members to divest their own personal biotech investments — even as they help shape U.S. policy overseeing the industry. Through a venture capital firm known as First Spark Ventures, Schmidt holds stakes in several biotech companies, placing him in a position to potentially profit if those companies are the beneficiaries of a new wave of federal biotech spending.

A person familiar with Schmidt’s thinking, who asked not to be identified, told CNBC on Jan. 19 that he wouldn’t be involved in selecting or monitoring any federal investments in the sector and that he isn’t involved in decision-making about First Spark’s investments. The person also said he would comply with all disclosure rules.

Then, on Jan. 25, after a series of emails and conversations with CNBC about the potential conflict of interest, the person said Schmidt will donate 100 percent of the “net profits” from his investment in First Spark to charity. The person didn’t say when Schmidt made the decision to donate profits, adding that he hasn’t yet named any recipient charities.

Due to the nature of venture capital investments, it could take years before a company is sold or goes public.

“This is a potential horror show,” Walter Shaub, the former director of the U.S. Office of Government Ethics, said of the new commission. “Congress created this commission without adequate safeguards against conflicts of interest.”

Shaub, an attorney who’s now a senior ethics fellow at the nonpartisan nonprofit Project on Government Oversight, said members of the commission are exempt from criminal conflict of interest laws that might otherwise require them to recuse themselves or divest certain holdings because it was set up by Congress and not the executive branch.

“These are individuals who are going to be helping to shape federal policy on the intersection of biotechnology and national security, and it’ll be legal for them to make recommendations that benefit their own personal financial interests,” Shaub said. “Because much of the work could be classified, the public may have no way to gauge how their financial interests are influencing their recommendations.”

A spokesperson for the Senate Armed Services Committee, which will oversee the commission, said Schmidt and other members were selected by bipartisan leaders in the House and Senate and are expected to follow government ethics rules.

“Every member on this commission is required to adhere to all government ethics policies,” the spokesperson said. “The commission itself is designed to prevent undue influence, and Congress will provide careful oversight throughout the commission’s work.”

The commission’s incoming chairman, Dr. Jason Kelly, doesn’t plan to relinquish his role as CEO of Boston biotech company Ginkgo Bioworks, which specializes in genetic engineering.

“Jason is serving on this commission in his personal capacity,” said Joseph Fridman, an executive at Ginkgo Bioworks. He didn’t address whether Kelly planned to divest any potential equity in the company as well. “I’ll also note that, in general, we regularly implement measures at Ginkgo to maintain our position as a trusted partner of the U.S. government.”

Schmidt’s decision to donate his profits “reinforce(s) that he volunteers for these roles for all the right reasons,” said the person familiar with his thinking. “The primary purpose is philanthropy,” the person said.

But Shaub said if Schmidt were to give the First Spark net profits to charity that it wouldn’t go far enough to address the problem. “Saying he’ll donate any profits changes nothing,” he said. “You either have a financial interest in the government work you’re doing or you don’t.”

The Pentagon is already deeply invested in the biotechnology sector. In September, for example, the White House announced that the Department of Defense will invest $1 billion in bioindustrial domestic manufacturing infrastructure over five years to spur development of the U.S. manufacturing base. The new federal commission will likely have a say in steering such investments over the two years of its lifetime.  

This is not the first time Schmidt has participated in an influential Washington commission. In October, CNBC reported that Schmidt and entities connected to him made more than 50 investments in artificial intelligence companies while he was chair of a federal commission on AI from 2018 to 2021. There was no indication that Schmidt broke any ethics rules or did anything unlawful while chairing the commission. And CNBC is unaware of any instance in which Schmidt abused his position on the earlier commission for personal financial gain.

Still, at the time, Shaub called Schmidt’s AI arrangement “absolutely a conflict of interest,” and said that it was “not the right thing to do.”

Schmidt’s biotech investments are relatively recent. Schmidt, who serves as a strategic advisor and nonmanaging partner, was a co-founder of First Spark in 2021. The firm’s investments are heavily concentrated in the biotech sector: in cutting-edge companies like Walking Fish Technologies, which focuses on cell engineering; Vitara Biomedical, a neonatal-care enterprise; and Valitor, which specializes in protein-based drug therapies. Representatives of the three companies did not respond to requests for comment.

CNBC attempted to reach First Spark officials through LinkedIn for comment, but did not receive a response. The firm’s website does not offer a telephone number or email address.  

CNBC attempted to reach the other members of the commission to determine how they would handle potential conflict of interest issues. A spokesman for Rep. Ro Khanna, who was named to the commission, said the congressman does not own any individual stocks, and his wife’s assets are in a diversified trust managed by an outside financial advisor. “Qualified diversified trusts eliminate conflicts and are therefore an appropriate vehicle to safeguard against any potential conflicts,” Khanna’s spokesperson said.

Dawn Meyerriecks, the former deputy director of the CIA for Science and Technology who will serve on the commission, told CNBC she does not have any personal investments in the biotech space.

“As you know, the Commission is not yet fully set up,” she said in a message via LinkedIn. “All the commissioners will file all disclosure forms that are required for service on the commission and work with government ethics counsel to consider any potential conflicts based on the expected work of the Commission. “

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