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| Here's your daily business briefing. - 💊 CVS revamps drug pricing
- 🎶 Deep Dive: Spotify cuts 17% of staff
- 🔍 Roche enters obesity drug race with Carmot buy
Make sure to continue reading the Quarterly Earnings Report and the Quick Hits. Shriram
p/Shriram | |
| 1 | | CVS Health is overhauling its prescription drug pricing strategy, abandoning the convoluted reimbursement and pricing model to tackle transparency issues and curb inflated healthcare costs. The new model, CVS CostVantage, set to launch on Jan. 1, 2025, aims to establish a transparent and sustainable formula for determining medication prices and corresponding reimbursements to pharmacies. More: - Based on the cost of the medication, a predetermined markup, plus fees for handling and distributing prescriptions, more than 9,000 CVS retail pharmacies will get reimbursement.
- There is uncertainty about costs and markups in the existing system since it involves a convoluted network of pharmacies, PBMs, medication producers, and insurers.
- Launched last year, billionaire Mark Cuban's Cost Plus Drugs takes a similar approach, charging a fixed 15% markup over the drug's retail price.
- Last month, Cigna announced that its PBM will use a pricing structure akin to Cost Plus Pharmacy.
- Driven by initiatives like Cost Plus Drugs and government actions to address medication costs, this has been instrumental in shaping changes to drug pricing models.
Zoom Out: - CVS Health's Caremark, a major U.S. PBM, is under scrutiny, along with other PBMs, for their role in escalating drug costs, with an ongoing Federal Trade Commission investigation.
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What the numbers say: Spotify plans to cut 1,500 employees (17% of its workforce) in its third 2023 layoff round, aiming for profitability amid economic challenges, incurring anticipated charges of up to $156M in Q4 2023. Despite an 8% stock increase to $195.42, shares remain roughly 46% below the record high in February 2021. Relevance: Spotify's move to cut jobs reflects a shift from growth to profitability, aligning with investor priorities as it trims its workforce, scales back a $1B podcasting initiative, and navigates a balance between emerging investments and meeting profitability goals. More data: Facing investor pressure, Spotify, like other streaming companies, aims for profitability by 2024 after reporting a $498B loss in the first nine months. The restructuring, including C-suite changes, follows a surprise Q3 profit, with departing employees receiving an average of five months' severance pay to reinvest earnings into the business strategically. | | | |
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| 3 | | Roche plans to purchase Carmot Therapeutics, a developer of obesity drugs, for an upfront payment of $2.7B. Carmot's leading drug candidate, CT-388, a once-a-week injection with encouraging Phase I trial results, is a dual GLP-1/GIP receptor agonist akin to Lilly's Mounjaro and is prepared for human testing in the second of its three trial stages. More: - Roche intends to position itself in the competitive weight-loss medication industry by launching CT-388 in the 2030s.
- Currently, Novo Nordisk leads the market with its injectable Wegovy, a single GLP-1 gut hormone receptor agonist.
- The acquisition is anticipated to be finalized in the first quarter of 2024, and Roche's agreement with Carmot includes milestone payments of up to $400M.
- Many businesses are vying for market share in the weight-loss industry, valued at up to $100B.
- The transaction follows new Roche CEO Thomas Schinecker's strategy to restore the development pipeline and diversify therapeutic areas to counteract declining cancer revenues.
Zoom Out: - AstraZeneca spent up to $2B for an experimental pill from China's Eccogene, and in July, Lilly acquired Versanis for up to $1.93B to strengthen their obesity drug development efforts.
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| 4 | | Procter & Gamble (P&G) is anticipating a $1.3B accounting charge on its Gillette business, acquired in 2005 for stock initially valued at $54B, solidifying its position as a significant player in the global razor market. However, the Gillette unit has encountered challenges in recent years from lower-priced competitors like Dollar Shave Club and Harry's. More: - P&G valued the grooming industry at approximately $14.1B as of June 2023.
- The company has written down the value of its shaving division before; in 2019, it incurred a $8B charge for Gillette.
- P&G stressed that the most recent adjustment is a noncash accounting charge and that Gillette is still performing well overall.
- The grooming segment of P&G, which includes Braun electric shavers, Gillette razors, and Venus razors, makes up over 8% of the company's yearly sales; in the most recent fiscal year, sales decreased by roughly 3% to $6.42B.
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| 6 | | EU lawmakers in Strasbourg have endorsed a law to make all EU packaging recyclable by 2030, aiming to cut over 80 million metric tons of annual packaging waste. The legislation may ban items like "ultra-light" plastic bags and harmful chemicals, as well as single-use items such as hotel mini toiletries, plastic fruit stickers, and small sugar sachets in cafes. More: - The 118-page bill impacts several businesses, including distributors of alcohol, producers of medical appliances, fruit growers, and takeaway restaurants.
- The most lobbied piece of EU legislation encountered resistance from nations like Finland and Italy, even ones with strong environmental policies, who asked for exceptions.
- A balanced approach to waste standards and sustainability has been urged for by many industries, including those that make paper and plastic.
- The new regulations sparked discussions and campaigns, with even Camembert manufacturers attempting to preserve the customary wooden packaging and making analogies to previous EU laws of bananas.
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| 7 | | Quick Hits: - The Kubernetes Cookbook is your comprehensive companion, equipping you with the knowledge and techniques to harness the full potential of Kubernetes.*
- Continental revealed its plan to make its user experience unit, responsible for vehicle instrument panels and displays, independent, opening the door to potential sale or ownership changes.
- On Monday, a U.S. appeals court overturned one of the largest patent-infringement awards in U.S. history, a $2.18B verdict won by VLSI Technology against Intel Corp.
- Johnson & Johnson foresees 5-6% revenue growth in 2024, the first full year post-separation of its consumer health unit, driven by high demand for cancer treatments Darzalex and Carvykti, along with the blockbuster psoriasis drug Stelara.
- Starting Thursday, Verizon "myPlan" subscribers can opt for a $10 monthly bundle that includes streaming subscriptions to both Netflix and the Warner Bros Discovery-owned Max platforms.
- Toast to 2024: Key affiliate marketing trends to help your campaigns start off on the right foot in the new year. Get the free report.*
*This is a sponsored listing. | | | |
 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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