WASHINGTON, April 28 ― Drugmakers including Merck & Co, AstraZeneca Plc and AbbVie Inc said yesterday they are open to acquisitions and reported a ramp up in research and development spending as the industry's larger players look for new sources of future revenue.
Several top drugs such as AbbVie flagship Humira have begun to face competition from new rivals or are expected to lose patent protections in the next few years, and deals could be a quick fix to address the loss of revenue from older therapies.
Merck recently announced a US$10.8 billion (RM48 billion) deal to buy Prometheus Biosciences Inc.
Chief Executive Robert Davis said that deal does not change the company's business development strategy.
“We're focused on building the pipeline, both near and long term, and we do deals across the full spectrum,” he said.
Sales of Merck's cancer immunotherapy Keytruda will start losing patent protections in 2028. Meanwhile, it has become the world's top selling prescription drug with first-quarter sales of US$5.8 billion, exceeding even analysts' lofty estimates.
Guggenheim analyst Seamus Fernandez said pharmaceutical patent expirations will accelerate from 2026 to 2032 and that most will face competition from biosimilars that compete with complex biologic drugs.
A drop in valuation of smaller US biotech companies from pandemic highs has made deals more attractive, and the collapse of top venture debt provider Silicon Valley Bank (SVB) is expected to worsen a funding drought for those companies.
“It's certainly more difficult to raise money for a biotech company. So it probably makes them a bit more willing to engage with players like us,” said an AbbVie executive during a call to discuss first-quarter results.
AbbVie yesterday reported sales that missed estimates for most treatments, including its blockbuster arthritis drug Humira, and its shares closed down 8 per cent.
Humira's US sales fell 26.1 per cent in the quarter to US$2.95 billion as it faced its first biosimilar competition from Amgen's Amjevita, and AbbVie forecast a steeper erosion in Humira's market share in the second quarter.
Amgen, which launched Amjevita in January, slightly increased its forecast for full-year 2023 revenue to US$26.2 billion to $27.3 billion, from the previous outlook of US$26 billion to US$27.2 billion.
That excludes the impact of Amgen's pending US$27.8 billion acquisition of Horizon Therapeutics Plc, which the company still expects to complete in the first half of this year.
Like Merck, AstraZeneca continues to reap the rewards of patent-protected cancer therapies for now.
AstraZeneca beat first-quarter estimates as sales of Imfinzi and strong demand in China helped soften the hit from falling sales of Covid-19 drugs.
The Britain-based drugmaker re-emphasized its focus in China, aiming to seize the opportunity to treat patients as the country bounces back from a protracted period of severe Covid restrictions.
In the last few months, AstraZeneca signed three licensing deals with Chinese companies, said CEO Pascal Soriot, adding that more, possibly larger moves are being contemplated.
“We definitely could make acquisitions. There is no limitation to this,” Soriot said.
R&D spending ramps up
Most drugmakers reporting on Thursday beat Wall Street estimates for first-quarter earnings, while Eli Lilly and Co missed mainly due to higher costs.
“You gotta spend money, to make money!” BMO Capital Markets analyst Evan Seigerman said of Lilly's results.
Research and development (R&D) costs at other drugmakers also rose in the quarter.
Merck reported a 66 per cent jump in R&D costs, attributing about US$1.2 billion to a charge from its acquisition of Imago. AstraZeneca's R&D spending rose 22 per cent in the quarter.
Amgen said its R&D costs rose 12 per cent in the first quarter, while Gilead Science Inc reported a 25 per cent research spending jump to US$1.4 billion, driven partly by higher expenses in late-stage clinical studies.
Gilead said it also expected full-year R&D expenses to rise to a low-double-digit percentage compared to 2022.
“We believe that there's a more appropriate level of investment for a company with a broad late-stage clinical portfolio that is targeting attractive opportunities and sustainable revenue growth,” said Chief Financial Officer Andrew Dickinson.
Share movements were mixed yesterday.
Eli Lilly shares closed 3.7 per cent higher after it raised its annual revenue and profit forecasts on demand for its closely watched diabetes drug Mounjaro, which is being used off-label as an obesity treatment.
Merck's shares had been down earlier but closed up 1.5 per cent, while shares of Bristol Myers Squibb fell 0.6 per cent after it missed first-quarter sales estimates. ― Reuters
