Drug companies are looking for their next blockbusters. That’s been easier for some than for others.
(Bloomberg) — Drug companies are looking for their next blockbusters. That’s been easier for some than for others.
Thursday was punctuated by highs and lows for the pharma industry. Eli Lilly & Co. said it was moving ahead with an approval application for an obesity medication after sharing data that showed it produced substantial weight loss in people with diabetes. That sent the stock up early. But other major players like AbbVie Inc., Merck & Co. and Bristol-Myers Squibb Co. either reported disappointing sales of key drugs or had to answer to analysts who asked if they were doing enough to find new ways to grow.
“The question everyone is asking is whether or not pipelines are strong enough to sustain long-term growth,” Bloomberg Intelligence analyst John Murphy said. “And if not, how active do the business development guys need to be to ensure it is achievable?”
By that he means companies are under pressure to find deals to bulk up for the future. Merck announced this month it’s buying autoimmune drugmaker Prometheus Biosciences for $10.8 billion. But that wasn’t enough to satisfy analysts who asked executives on an earnings call Thursday whether that deal or other recent moves would be enough to offset the looming hole when its cancer drug Keytruda loses exclusivity in 2028. Keytruda brought in nearly $24 billion last year.
Merck’s Chief Executive Officer Rob Davis touted the progress the company has made to bolster its pipeline and potential profits. “I am no longer focusing on 2028,” he added, referencing the year Keytruda sales are likely to start coming under pressure. “I am looking at how do we have sustainable growth well into the next decade.”
Under Pressure
AbbVie is already experiencing the headache Merck is likely to face. Its blockbuster Humira, long one of the world’s top-selling drugs, pulled in $21.2 billion in sales last year. This year it’s starting to face competition from biosimilars, which like generics are lower-priced copycat drugs.
In the first quarter, Humira sales fell 25% from a year ago, though they beat Wall Street’s expectations. More worryingly, sales of two crucial medicines meant to eventually replace Humira fell short. The company’s shares fell 8%, the most in a year.
“AbbVie needs to instill confidence that growth from the novel inflammation franchise will drive earnings as Humira turns over with biosimilar entrants,” BMO analyst Evan Seigerman said.
Bristol-Myers Squibb Co is facing a similar test with cancer drugs Revlimid and Abraxane. The medicines started facing generic rivals last year. Revlimid was Bristol’s second biggest drug last year, which it acquired through its $74 billion purchase of Celgene in 2019.
In the first quarter, Revlimid sales decreased 37% from the year-ago period, weighing on Bristol’s overall results. Revenue of $11.34 billion missed consensus estimates. Bristol’s stock slipped about 1.2%.
“Bristol’s overall performance across its portfolio unfortunately felt rather lackluster, despite management’s characterization as a solid showing, as many product lines fell short of expectations,” Third Bridge analyst Lee Brown wrote Thursday.
Bristol’s CEO also announced his unexpected retirement this week. He’s being replaced by the company’s chief commercial officer. Bristol has a cancer drug that will also likely be facing competition later this decade.
Bright Spot
The one company clearly bucking the trend this week was Lilly. Investors looked past weaker-than-expected quarterly earnings, which were dragged down by fading Covid drug sales, to promising results from Mounjaro for weight loss. Currently available for people with diabetes, the medicine brought in $569 million during the first quarter, more than it had sold in its first six months on the market. The impending obesity indication could only drive that drug’s sales further. Analysts expect it to be making more than $10 billion annually within a few years. Lilly’s shares rose 2.3%.
Analysts are even more confident in Mounjaro after Lilly shared new data Thursday showing people with diabetes and obesity achieved weight loss of up to 15% of their body weight, or around 30 pounds, in a large trial.
“This sets a high watermark for what’s achievable for weight loss in type 2 diabetes and I think we’re very confident in the competitive profile here,” Chief Medical Officer Dan Skovronsky said in an interview.
–With assistance from Bre Bradham and Emma Court.
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