Is $475,000 Too High a Price for a 'Historic' Cancer Treatment?

FOLLOW subscribe SEND TIP August 31, 2017 Good morning, readers! This is Sy. On Wednesday, Swiss pharmaceutical giant Novartis made history as the first company to win Food and Drug Administration (FDA) approval for a groundbreaking new type of cancer treatment known as CAR-T. This technology harnesses the power of patients’ very immune cells—which are extracted from them, reengineered in a lab, and then pumped back into the body—to kill aggressive blood cancers. The treatment, named Kymriah, was hailed by doctors and the life sciences community as a major advance in medicine and a boon to children and young adults with a certain form of leukemia (the group for whom the gene therapy is approved). The FDA itself called the approval a “historic action.” “It’s really transformative,” as Dr. Kevin J. Curran, a pediatric oncologist at the Memorial Sloan Kettering Cancer Center, told Fortune in an interview. “It’s shown a massive response rate in people with these cancers. It’s given hope to patients and parents. If other treatments fail, we can tell them, we have this new weapon in our arsenal that teaches your cells to fight cancer.” But Novartis immediately faced backlash from several patient groups over the therapy’s massive list price. The company announced that Kymriah would ring in at $475,000 for a treatment course (and that’s actually a bit less expensive than what many analysts had expected). To some, that price tag is unjustifiable. Drug price scandals have become a prominent flashpoint in America over the last several years, with companies like Valeant and Mylan under the gun for gigantic list price hikes on old products. However, there are those who argue that Novartis CEO Joe Jimenez shouldn’t be lumped in with the Martin Shkrelis of the world considering Kymriah’s formidable benefit (many patients see no signs of their hard-to-treat cancers at all three months after treatment) and the first-of-its-kind pricing structure the company is pursuing in the U.S. “The thing that's hard to articulate about this is, whenever you see a high absolute price, it seems wildly outrageous. $475,000 is a lot of money, no question,” said Brad Loncar, a biotech investor who runs a fund dedicated to cancer immunotherapies, in an interview with Fortune. “But the price in this case, in my opinion, was not set by greed.” Loncar argues that, unlike companies that abuse their prerogative to dictate whatever list prices they want in the U.S., Novartis has actually pulled off the kind of scientific innovation that the biopharma industry claims as its beating heart. He also points to the “outcomes-based” pricing model that the company will be instituting alongside the federal Centers for Medicare and Medicaid Services (CMS)—Novartis will only receive reimbursements for Kymriah if patients respond to it after the first month of treatment. “Joe Jimenez deserves a lot of credit for leadership today. I think this would have looked very different if it were another company,” said Loncar. “I'm not sure if for this indication Novartis can even make it profitable.” Loncar believes that prices will actually come down in the CAR-T field as companies continue to innovate and navigate the manufacturing complexities of the treatments. And if more drug makers and insurance companies join in on a movement to price medicines based on how effective they actually are for patients, Loncar says, the U.S. could see not just a new frontier in science, but a “new era in how we pay for cancer therapies.” For more valuable insight into the Novartis drug and the pay-for-performance model, make sure to check out this new piece from renowned medical oncologist David Agus and health economist Dana Goldman. Read on for the day’s news. Sy Mukherjee @the_sy_guy sayak.mukherjee@fortune.com . DIGITAL HEALTH The FDA has recalled 465,000 pacemakers over hacking fears. The Food and Drug Administration is recalling 465,000 pacemakers after discovering security vulnerabilities that could potentially leave the devices open to hacking. The affected devices are from companies like Abbott—luckily, replacements aren't necessary as the issue can reportedly be resolved with a firmware update. (Fortune) . INDICATIONS A film festival focused on rare diseases. A slew of major pharmaceutical companies including Shire, Vertex, and Sanofi Genzyme are among the sponsors for "Disorder," the first-ever film festival dedicated to rare diseases. On October 2 and 3, the festival will feature 30 films and documentaries about two dozen rare diseases. (FiercePharma) . THE BIG PICTURE Struggling Houston hospitals may flail more after Harvey. Houston-area hospitals which already have to deal with a glut of patients who can't afford to pay may face even bigger financial strains in the wake of Hurricane Harvey (now downgraded to a storm). Many facilities have already had to evacuate or cancel procedures, adding to existing losses, and residents affected by the flooding may be forced to forgo medical care in the coming weeks and months. (Reuters) Amazon is facing a lawsuit over those eclipse glasses. Amazon is staring down a proposed class action lawsuit over protective glasses sold during the recent solar eclipse. A couple claims that they purchased packs of the glasses prior to the eclipse but experienced vision problems despite using them. Amazon was forced to issue a recall of some glasses that it couldn't verify as having been manufactured by reputable vendors. (Fortune) . . REQUIRED READING Innovative Drugs Deserve Innovative Pricing, by David Agus and Dana Goldman Exclusive: Sequoia Is Running a Mentorship Program for Women, by Michal Lev-Ram Warren Buffett Says This Is the Only Real Threat to the U.S. Economy, by Lucinda Shen This Is When Uber Could Go Public, by Kirsten Korosec Produced by Sy Mukherjee @the_sy_guy sayak.mukherjee@fortune.com Find past coverage. Sign up for other Fortune newsletters. . Email Clifton Leaf subscribe share: . This message has been sent to you because you are currently subscribed to Brainstorm Health Unsubscribe here Please read our Privacy Policy, or copy and paste this link into your browser: http://www.fortune.com/privacy All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website. 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Term Sheet: Aug. 31, 2017

FOLLOW subscribe ANON TIP August 31, 2017 JAPAN INC. Good morning, Term Sheet readers. Just a reminder that if you have comments, feedback, or tips, find me on Twitter or send me an email at polina.marinova@fortune.com.   . .   Japan has become one of the most undervalued markets for private capital investment. For decades, the country was trapped in a deflationary spiral, exacerbated by slow growth and an inefficient workplace culture. But Japan's corporate culture is beginning to shift. Most notably, Japanese conglomerates, long averse to selling divisions (even the money-losing ones), are starting to treat each business as its own entity, setting the stage for more M&A activity. In response, foreign PE investors have pounced. KKR, for instance, has been responsible for a ton of deals in the country. In 2016, it bought auto-parts maker Calsonic Kansei for $4.5 billion, the biggest acquisition by a private-equity fund in Japan. In January, KKR acquired Hitachi's power-tools unit for $1.3 billion. Pitchbook just came out with its latest analyst report on opportunities in Japanese private equity. Here are the most important takeaways: • Many Japanese companies are still bloated with poor capital allocation, which provides opportunities for PE firms to streamline operations and expand margins. • The Japanese corporate tax rate is roughly 24%, one of the lowest tax rates in the developed world. Combined with cheap debt, this could enhance potential PE returns. • EV/EBITDA multiples for publicly traded Japanese companies sit at 7.9x as opposed to 11.9x for U.S. public companies. It is likely there is even greater variance between public and privately held companies relative to the U.S. or the E.U. See the full report here. LAYOFFS: Things are not looking good for coding bootcamps. Galvanize, a Denver-based for-profit coding school that has raised approximately $63 million in venture funding, is laying off 11% of its staff. The downsizing comes as the company shifts its focus from teaching online students to serving corporate clients. And it's not alone. Eight coding schools have shut their doors in the last year, including Dev Bootcamp and Iron Yard . The layoffs at Galvanize are another sign that companies in the nascent coding bootcamp industry are struggling to live up to investor expectations. Get more details here. MORE UBER: Sorry guys, it looks there will always be Uber news. In his first day on the job, Uber chief Dara Khosrowshahi took a fun selfie with ex-CEO Travis Kalanick, before casually dropping this bombshell: he wants to take the company public in the next 18 to 36 months. "I am not going to bullshit you, and I would ask that you not bullshit me," he reportedly said to the staff. Read more about what happened at yesterday's all-hands meeting. OPEN MIC: To kick off my first week's Open Mic, I would love to hear your thoughts on the following question: What industry do you think blockchain will affect or disrupt that no one is talking about? Send me your wildest, most brutally honest responses. This should be fun. . . THE LATEST FROM FORTUNE... • How Box plans to reach $1B in revenue within 3 years (by Barb Darrow) • Why innovative drugs deserve innovative pricing (by David Agus & Dana Goldman) • Nest doesn't want you to notice its new smart thermostat (by Don Reisinger) • Hackers infiltrated 'high-profile' Instagram accounts (by Jonathan Vanian) • The biggest threat to the U.S. economy, according to Warren Buffett (by Lucinda Shen) …AND ELSEWHERE Texas chemical plant explodes after hurricane damage. Wells Fargo raises tally of unauthorized accounts. Disney is cutting staff at ABC. Amazon faces possible lawsuit over eclipse glasses. Organic Doritos. . VENTURE DEALS • Qadium, a San Francisco-based cybersecurity company, raised $40 million in funding, according to VentureBeat. IVP led the round, and was joined by investors including TPG Growth, NEA, Founders Fund, and Susa Ventures. Read more. • TravelBank, a San Francisco-based provider of a travel expense and rewards app for business, raised $25 million in Series B funding. DCM Ventures led the round, and was joined by investors including Propel Venture Partners, DanHua Capital, New Enterprise Associates, Accel Partners and Silicon Valley Bank. • HowStuffWorks, an Atlanta-based podcasting company, raised $15 million in Series A funding. The Raine Group led the round. • BitPesa, a Kenya-based bitcoin remittance platform, raised funding of an undisclosed amount in its follow up to its Series A funding round. Greycroft led the round, and the total capital raised is now $10 million. • elium, a collaborative platform for knowledge-based organisations, raised €4 million ($4.7 million) in Series A funding. Serena Capital led the round, and was joined by investors including S.R.I.W. • Adwerx, a Durham, N.C.-based advertising and re-targeting network for real estate agents, raised a $4.3 million in funding, according to TechCrunch. Grotech Ventures led the round, and was joined by investors including Bull City Venture Partners and Alerion Ventures. Read more. • Gamer Sensei, a Cambridge, Mass.-based professional e-sports coaching service, raised $4 million in funding. Accomplice and Advancit Capital led the round, and were joined by investors including Origin Ventures, CRCM Ventures, Kiwi Ventures, aXiomatic, Abstract Ventures and Subversive Capital. • SPORTLOGiQ, a Montreal-based developer of sports statistics solutions, raised C$5 million ($4 million) in Series A funding. Rho Canada Ventures L.P. and Anges Quebec Capital S.E.C led the round, and were joined by investors including Mark Cuban and TandemLaunch. • SafeTrek, a San Diego, Calif.-based personal safety focused technology company, raised $3.2 million in seed funding. Cultivation Capital led the round, and was joined by investors including New Enterprise Associates, Maveron, and Aspect. • VeriTread, a Mulberry, Fla.-based startup with products aimed at simplifying the heavy-haul transportation process for consumers and distributors, raised $2.5 million from Sumitomo Corporation of Americas. • Upper Hand, an Indianapolis-based provider of sports software, raised funding of an undisclosed amount for a total of $2.4 million. Investors include Elevate Ventures. • Islands, a college-focused digital communication platform, raised $1.85 million in funding. Investors include Greylock, Scott Belsky, and Vaizra Investments, and Howard Lindzon. • Bambu, a Singapore-based B2B robo-advisor platform provider, raised funding of an undisclosed amount. Investors include Franklin Templeton Investments, Wavemaker Partners, and Robby Hilkowitz. . HEALTH AND LIFE SCIENCES DEALS • BrainScope Company Inc, a Bethesda, Md.-based medical neurotechnology company, raised $16 million in funding. Investors include DBL Partners, Revolution LLC, ZG Ventures and Maryland Venture Fund. . PRIVATE EQUITY DEALS • ProAct Services Corporation, a portfolio company of Hammond, Kennedy, Whitney & Company Inc, acquired Thermtech, a Waukesha, Wis.-based heat treating company. Financial terms weren't disclosed. • Equistone Partners Europe acquired DefShop, a Germany-based multi-channel retailer for streetwear and hip-hop clothing. Financial terms weren't disclosed. • TPG Growth and QRG Enterprises Limited made a minority investment in Campus Activewear, an India-based casual sports and footwear brand. • The Jordan Company agreed to acquire a majority stake in Odyssey Logistics & Technology Corporation, a Danbury, Conn.-based global logistics provider. Financial terms weren't disclosed. . OTHER DEALS • Albaugh LLC, an Ankeny, Iowa-based crop protection chemicals producer, is exploring a sale that could value the company at more than $1.5 billion, including debt, according to Reuters. Read more. • Blackhawk Network acquired CashStar, a Portland-based digital gifting platform, for $175 million in cash. • BroadSoft Inc, a Gaithersburg, Md.-based provider of software that helps companies offer cloud-based communications services, is exploring its options, including the potential sale of the company, according to Reuters. Read more. • Galeries Lafayette will buy a majority stake in La Redoute, a France-based online and catalog retailer, according to Reuters. Financial terms weren't disclosed. Read more. • Siemens agreed to buy Tass International, a Netherlands-based self-driving software specialist, for an undisclosed amount, according to Reuters. Read more. • GetInsured acquired health insurance-focused company ACAExpress.com and its sister brand Benefit Geek. Financial terms weren't disclosed. • Lithium Technologies, Inc, agreed to acquire Jive Software's external community business from Jive Software, a Palo Alto, Calif.-based communication and collaboration solutions provider. Financial terms weren't disclosed. • Lukoil (MISX:LKOH) is considering selling its Swiss unit Litasco, according to Reuters. Financial terms weren't disclosed. Read more. . IPOs • RYB Education, a childhood educational services provider, filed for an IPO of American depository shares raising up to $100 million. In 2016, the company posted revenue of $108.5 million on earnings of $5.9 million. Credit Suisse and Morgan Stanley are joint bookrunners in the deal. . EXITS • Accel-KKR sold HighJump Software Inc, a Minneapolis, Minn.-based provider of warehouse management, transportation management and logistics software, to Korber AG. . PEOPLE Jesse Phillips joined Booz Allen Hamilton in the corporate development department as lead associate. Previously, Phillips was at Updata Partners. . SHARE TODAY'S TERM SHEET View this email in your browser. Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here. . Email Polina Marinova subscribe share: . This message has been sent to you because you are currently subscribed to Term Sheet Unsubscribe here Please read our Privacy Policy, or copy and paste this link into your browser: http://www.fortune.com/privacy All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website. For Further Communication, Please Contact: FORTUNE Customer Service 3000 University Center Drive Tampa, FL 33612-6408 Advertising Info | Subscribe to Fortune