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Tuesday, May 24, 2022

2017 Year in Review: Healthcare

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5 Big Stories

Allergan PLC’s (NYSE: AGN) transfer of patents on its blockbuster dry-eye drug Restasis to a Native American Tribe in September is not only a top story this year, but one that will continue unfolding into 2018.

Restasis, which reported 2016 revenue of over $1.4 billion, is second for the drugmaker to Botox, which generated nearly $2 billion.

To protect its patents from generic-brand competition in two courts—federal and the inter partes review, or IPR, procedure at the U.S. Patent and Trademark Office—Allergan struck a deal with the Saint Regis Mohawk Tribe in New York to transfer the rights of Restasis to the Mohawks. The tribe can protect the patents from competitors on the grounds of sovereign immunity under the IPR system.

The unusual step raised eyebrows and drew criticism, including from Congress. A federal district court ruling in October invalidated exclusive protections for Restasis.

Shares are down more than 20% since Allergan announced the tribe deal and now trade at approximately $164 per share for a $56 billion market cap.

Allergan said it will fight the federal court ruling but that it’s prepared for the possibility it might lose exclusivity on Restasis as early as next year.

Aliso Viejo-based Ambry Genetics Corp. is a big winner in the trend toward precision medicine—disease treatment and prevention that takes into account individual variability in genes, environment and lifestyle. The genetic diagnostics company was sold to Konica Minolta for up to $1 billion, including $800 million upon closing.

The two share more synergy than the Japanese office products supplier let on. Konica owns a proprietary cancer-detecting protein-based technology that complements Ambry’s DNA testing platform.

Renton, Wash.-based Providence Health & Services and Irvine-based St. Joseph Health joined forces in July 2016 to create Providence St. Joseph Health. The merged entity—a 50-hospital health system that spans seven states—still felt like two Catholic health systems with dual headquarters in Renton and Irvine.

The upcoming departure of Richard Afable, president and chief executive of Irvine-based St. Joseph Hoag and also executive vice president and regional executive of Providence St. Joseph in Southern California, points to a shift in the structure. He is replaced by Erik Wexler, who oversees the Southern California region, which consists of Los Angeles, Orange and San Bernardino counties.

Senior housing-focused real estate investment trusts HCP Inc. (NYSE: HCP) and Sabra Health Care REIT Inc. (NASDAQ: SBRA) had a busy year working to strengthen their portfolios and shed troubled operators.

HCP opted to divest—spinning off its skilled nursing and assisted-living assets into a separately traded independent REIT, and is aggressively reducing exposure to major tenant Brookdale Senior Living (NYSE: BKD).

Sabra, on the other hand, chose to quickly reduce the concentration of its largest tenant, Genesis Healthcare Inc. (NYSE: GEN), through acquisitions, including buying Chicago-based Care Capital Properties Inc. in August.

Both REITs traded lower this year, Sabra off about 25%, HCP 15%. Next year’s earnings will start to show if the two big OC REITs’ strategies are prudent.

Nearly six months after some investors aired grievances against Tustin-based Peregrine Pharmaceuticals Inc. (NASDAQ: PPHM), the company announced it will change from a clinical-stage pharmaceutical company to a pure-play contract manufacturer of biologics. Its cash-generating manufacturing subsidiary operates as Avid Bioservices Inc.

Peregrine expanded its board from four to seven—reconstituting with four new independent directors with contract development and manufacturing experience. Four incumbent board members, including Peregrine Chief Executive Steven King, resigned.

Roger Lias replaced King as president of Avid in September and will lead the company.

Investors cheered the shift. Shares of Peregrine popped from $3 per share in October to $5.25 on Dec. 7—adding $100 million in shareholder value.

Honorable Mentions

• Rancho Santa Margarita-based Applied Medical Resources Corp. expanded in Europe with a new 215,000-square-foot manufacturing facility at its European headquarters in the Netherlands to support manufacturing and distribution across Europe, the Middle East and Africa.

Applied develops minimally invasive surgical products used in a wide range of surgeries. It owns 18 buildings totaling 1.4 million square feet in OC.

• OC welcomed back one of its very own—drugmaker Dendreon Corp.

The biopharmaceutical company makes the Food and Drug Administration-approved immunotherapy drug Provenge, which is designed to treat advanced prostate cancer.

Dendreon was sold to Valeant in 2015 for nearly $495 million after filing for bankruptcy. Valeant sold Dendreon to Chinese conglomerate Sanpower Group for $819.9 million.

Next Week

A big year lies ahead for a biopharmaceutical company and its immunotherapy that targets “multiple bad actors.”

—Sherry Hsieh

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