Valeant 2 top drugs are face big risks - Business Insider
`
`http://www.businessinsider.com/valeant-two-top-drugs-are-face-big-risk...
`
`LINETTE LOPEZ
`MAR. 3, 2016, 11:20 AM
`
`Hedge
`fund
`billionaire
`Bill
`Ackman
`has one big
`reason for
`staying in
`the center
`of a storm.
`
`That storm
`is Valeant
`
`Activist investor Bill Ackman on the floor of the New York Stock Exchange on November 10.
`
`REUTERS/Brendan McDermid
`
`Pharmaceuticals, a stock that has seen its price fall 70% in the past six months. As Ackman's largest position in
`the market, it blew a giant hole in his fund's portfolio at the end of 2015.
`
`But Ackman is sticking by the company, and here's why:
`
`"We expect that much of the uncertainty will be resolved in the relative short term, hopefully in a few weeks or so
`when we expect the company to issue results, update guidance, and file its 10-K," according to a statement read
`on CNBC on Wednesday.
`
`"Based on publicly available information it appears that Valeant's core franchises remain strong."
`
`That's where Ackman could be wrong.
`
`The reality is that, regardless of whether you believe Valeant has been transparent and fair with investors, the
`company's top two drugs face some serious risks. Forget the multiple federal and state investigations, forget
`scrutiny from Congress over the company's pricing practices, and forget the delayed quarterly and annual
`reports.
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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1540
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`

`

`Valeant 2 top drugs are face big risks - Business Insider
`
`http://www.businessinsider.com/valeant-two-top-drugs-are-face-big-risk...
`
`Lets just focus on those "core franchises."
`
`Valeant's two hottest drugs are Xifaxan, a remedy for irritable-bowel syndrome, and Jublia, a $1,000 drug to
`treat toe fungus.
`
`We'll start with Jublia, because its challenges
`are more straightforward. Jublia is Valeant's
`No. 2 drug by revenue, pulling in $106 million
`for the company in the third quarter of 2015.
`
`Here's the problem: Toe fungus can probably
`be treated for a lot less than $1,000, and
`people are figuring this out.
`
`CVS, the massive drugstore chain, said in
`February that it was going to require that
`customers try and fail to be cured by less
`expensive drugs before it would sell them
`Jublia. It was a big development that was
`overshadowed by all the other news about
`Valeant's financial restatements.
`
`Consider this from a conversation Bloomberg's
`Robert Langreth had with CVS's chief medical officer:
`
`Valeant
`
`Older nail-fungus medicines are "much more efficacious" than Jublia and cost far less, said Brennan. "It is a
`circumstance where we can go to clients and say, this is just waste we are eliminating."
`
`On the internet, there's something of a debate raging about Jublia's effectiveness. Some even argue that Vicks
`Vapor Rub is just as effective. But we'll leave that to the people with toe fungus to decide.
`
`Then there's this, from Wells Fargo analysts earlier this month, about how Valeant's defunct pharmacy Philidor
`might have been propping up Jublia sales (emphasis ours):
`
`We believe that a substantial portion of Jublia's growth was fueled by Philidor and anticipate a
`significant negative impact to Jublia from the termination of Philidor and shift to Walgreens.
`While Jublia has patent protection into 2030, its exclusivity ends in 2019, and we believe competitors may be
`keen on introducing a less expensive version of the drug.
`
`In Business Insider's discussions with Philidor employees last year, Jublia was brought up time and time again as
`one of their biggest sellers. Patients would pay a $0 copay, and insurance companies could be charged $535 to
`$1,500 for Jublia. Jublia was also mentioned in a Philidor employee manual. From Bloomberg:
`
`The manual instructed employees to submit claims under different pharmacy identification numbers if an
`insurer rejected Philidor's request for reimbursement — to essentially shop around for one that would be
`accepted.
`
`Now Philidor is no more, and with CVS being uncooperative, 2016 is already looking very different from 2015 for
`Jublia.
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`Valeant 2 top drugs are face big risks - Business Insider
`
`http://www.businessinsider.com/valeant-two-top-drugs-are-face-big-risk...
`
`You'll also note that Jublia sales have started leveling off.
`
`Wells Fargo
`
`Valeant picked up Xifaxan in its $11 billion acquisition of Salix Pharmaceuticals (an acquisition now under
`investigation by both the US attorney's office for the Southern District of New York and the Securities and
`Exchange Commission).
`
`Since then, Xifaxan has been huge for Valeant. The company thinks it may make $1 billion in 2016, and it
`generated $220 million in Q3 2015 alone. It also has FDA approval for an irritable-bowel-syndrome indication,
`which means that it is the go-to treatment for IBS. (Actavis Pharmaceuticals' Viberzi is also approved for an IBS
`indication.)
`
`All of this is great, but it won't last forever. In fact, it won't last 10 years (so watch your DCF models, Wall Street).
`
`Valeant was just informed that the FDA approved an abbreviated new drug application, or ANDA, for a generic
`version of Xifaxan in December. The application was filed by Allergan Pharmaceuticals, a company Valeant
`unsuccessfully tried to acquire in 2014.
`
`Xifaxan has what's called "Orange Book exclusivity." To file the ANDA, Allergan first had to file what is called a
`P-IV certification. That means Allergan is challenging Xifaxan's exclusivity because it's invalid, not infringed, or
`unenforceable.
`
`To counter and stop the generic from coming to market, Valeant will sue Allergan. If it sues within 45 days, it can
`get a 30-month stay. To get around the 30-month stay, Allergan can file an inter partes review against the
`patents, which could kill exclusivity within 18 months.
`
`In the best-case scenario for Valeant, Allergan will slug it out in court for three to four years before its drug is able
`to get to market. The best case.
`
`Either way, Xifaxan's billion-dollar days are numbered. Valeant has yet to respond to Business Insider's request
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`Valeant 2 top drugs are face big risks - Business Insider
`
`http://www.businessinsider.com/valeant-two-top-drugs-are-face-big-risk...
`
`for comment on this story.
`
`On Monday night Valeant announced that the
`head of US dermatology and gastrointestinal,
`Deb Jorn, was resigning effective immediately.
`Jorn was responsible for both Jublia and
`Xifaxan.
`
`Solodyn (another of Valeant's top 10 brands)
`was also under her purview.
`
`This is supposed to be a year of transition for
`Valeant: The company has committed to
`lowering prices across the board and paying
`down its $30 billion debt load.
`
`Valeant
`
`It also said it wouldn't be doing any mergers-
`and-acquisitions deals, which is how the
`company acquired drugs in the model it says it is now leaving behind.
`
`So that means the resilience of potential blockbuster drugs like Jublia and Xifaxan is all the more important.
`
`But with those stars already fading, Valeant will have to prove that it has products in the pipeline that can shine
`as brightly as the previous ones did. That's not an easy task in good times. It's a horror show in times like
`Valeant's.
`
`×
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`Valeant 2 top drugs are face big risks - Business Insider
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`http://www.businessinsider.com/valeant-two-top-drugs-are-face-big-risk...
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