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Big pharmaceutical firms similar to Bristol Myers Squibb, Merck and Johnson & Johnson face a looming threat that may put tens of billions of dollars in sales in danger between now and 2030, as blockbuster drugs will tumble off a so-called patent cliff.
That refers to when an organization’s patents for a number of leading branded products expire, which opens the door for competitors to sell copycats of those drugs, often at a lower cost. That typically causes revenue to fall for drugmakers and costs to drop for patients, who can access more cost-effective options.
Certain drugmakers appear well prepared to offset some losses from upcoming patent cliffs, as they construct their drug pipelines and ink acquisitions or partnerships with other firms, some Wall Street analysts said.
Patent cliffs are an unavoidable issue for pharmaceutical firms. They have to replenish older top-selling drugs with recent ones that they hope is not going to just sustain their sales, but additionally grow them.
The lack of exclusive rights on a drug can affect firms otherwise, depending on how much of their sales they get from the product or what style of treatment it’s. Some drugs facing patent expirations may even be subject to the Biden administration’s Medicare drug price negotiations, a policy that will further threaten the businesses’ revenues.
The highest 20 biopharma firms have $180 billion in sales in danger from patent expirations between now and 2028, in response to estimates from EY.
“It does differ by company at this stage, and I feel there are numerous products within the ’25, ’30 timeframe that can be major growth drivers for big biopharma firms … but all in all, there are many firms which have revenue holes to plug,” William Blair & Company analyst Matt Phipps told CNBC.
Some top drugs set to lose exclusivity
Merck’s Keytruda is an immunotherapy that treats melanoma, head and neck, lung and other certain sorts of cancers.
- Key patent expirations: 2028
- 2022 sales: $20.94 billion
- Percentage of company’s total 2022 sales: Roughly 36%
- Estimated future revenue: $14.9 billion in 2030, in response to Guggenheim estimates.
Bristol Myers Squibb’s Eliquis is a blood thinner used to stop clotting, to cut back the chance of stroke.
- Key patent expirations: 2026 to 2028
- 2022 sales: $11.79 billion
- Percentage of company’s total 2022 sales: Around 25%
- Estimated future revenue: $478 million in 2032, in response to Leerink Partners estimates.
Bristol Myers Squibb’s Opdivo is an immunotherapy used to treat cancers, including melanoma and lung cancer.
- Key patent expirations: 2028
- 2022 sales: $8.25 billion
- Percentage of total 2022 sales: Almost 18%
- Estimated future revenue: $3.18 billion in 2032, in response to Leerink Partners estimates.
Johnson & Johnson’s Stelara is an immunosuppressive medication used to lower inflammation and treat several conditions, including plaque psoriasis and psoriatic arthritis.
- Key patent expirations: 2024 in Europe, 2025 within the U.S. (Stelara’s patents began to run out within the U.S. last yr, but the corporate struck deals with competitors to delay the launches of copycat drugs).
- 2022 sales: $10.86 billion
- Percentage of total 2022 sales: Around 12%
- Estimated future revenue: $2.63 billion in 2028, in response to FactSet estimates.
The style of drug matters
Patent cliffs could differ depending on whether the product is a small-molecule drug – meaning it’s fabricated from chemicals which have low molecular weight – or a biologic, or a drugs derived from living sources similar to animals or humans.
Lots of the largest drugs facing upcoming patent expirations are biologics, including Merck’s Keytruda, J&J’s Stelara and Bristol Myers Squibb’s Opdivo. Those drugs will inevitably rake in less revenue, however it may take time before so-called biosimilars threaten their dominance.
Investors will get updates on Merck and Bristol Myers Squibb’s plans for the years ahead after they report earnings on Thursday and Friday, respectively.
Phipps said biosimilars have historically “had trouble gaining market share” from their branded counterparts. That is unlike generics, that are cheaper copycats of small-molecule drugs like Bristol Myers Squibb’s Eliquis.
The difference is that many biosimilars aren’t similar copies of branded biologic drugs, while generics are.
Which means biosimilars usually are not interchangeable: Pharmacists cannot directly substitute a branded biologic for a biosimilar when filling a prescription. Not all patients will react to a biosimilar in the identical way as they do to a biologic, which makes some physicians more wary of switching patients to them.
Biosimilars also cost far more to research and develop, and are more complex to fabricate, than generics, making biosimilar makers less willing to sell them at significant discounts to branded counterparts, Phipps noted.
Humira, the injectable rheumatoid arthritis treatment is pictured in a pharmacy in Cambridge, Massachusetts.
JB Reed | Bloomberg | Getty Images
One example is AbbVie‘s Humira, a biologic that helps treat an array of inflammatory diseases. Several biosimilars of Humira debuted in the marketplace last yr, however the drug has up to now only lost 2% of its market share to those copycats, in response to a report released this month by Samsung’s biopharmaceutical subsidiary, Bioepis.
That is partly since the drugmaker has offered rebates on Humira to pharmacy profit managers. Its lower cost has cut revenue, but additionally it is helping the drug stay competitive.
“What’s really impacted shouldn’t be volume available in the market, it’s price,” Piper Sandler senior analyst Christopher Raymond said. He added that Humira is a highly profitable drug, so AbbVie can set a lower cost and “still maintain a really, very decent margin.”
Still, AbbVie expects that Humira’s revenue declined by 35% last yr in comparison with 2022, when the drug raked in greater than $21 billion.
Raymond forecasts a 33% drop in 2023 and a similar decline in 2024, to slash its revenue to about $9.5 billion.
Drugmakers prepare to offset losses
JPMorgan sees the upcoming patent cliffs within the mid-2020s as “largely manageable” as drug pipelines improve, and expects the biopharmaceutical industry’s sales to be “roughly stable” through 2030, analyst Chris Schott said in a note in December.
Take Merck: Schott wrote in a January note that the corporate “has made substantial progress in addressing its post Keytruda” patent expiration, adding that the corporate’s “post 2028 profile is looking increasingly attractive.”
In the course of the JPMorgan Health Care Conference earlier this month, Merck CEO Robert Davis said the corporate expects to have greater than $20 billion in sales from oncology drugs by the mid-2030s, which is double the forecast the corporate provided throughout the same time last yr.
That improved outlook now includes three antibody-drug conjugates – which goal cancer cells and minimize damage to healthy ones – from the licensing agreement Merck inked with Daiichi Sankyo in October. It also includes Merck and Moderna‘s personalized cancer vaccine, which has yielded promising mid-stage data when combined with Keytruda to treat probably the most deadly type of skin cancer.
The corporate also hiked its revenue outlook for cardiometabolic drugs to around $15 billion by the mid-2030s, up from a previous guidance of $10 billion.
Davis noted that Merck views Keytruda’s patent expiration as a “hill, not a cliff,” and is targeted on making “the dip as small as possible and the return to growth as fast as possible.”
Meanwhile, JPMorgan’s Schott said shares of Bristol Myers Squibb had a difficult 2023, as recent drugs ramped up “slower than expected.”
But JPMorgan expects those recent products, together with the drugmaker’s recent acquisitions and growing mid- to late-stage pipeline, will “ultimately position the corporate for growth” after upcoming patent expirations. For instance, Bristol Myers Squibb acquired Karuna Therapeutics, which develops drugs for psychiatric and neurological conditions, for $14 billion in December.
Meanwhile, Schott said he believes J&J is “well positioned for healthy growth” after Stelara’s patent expires. The firm believes the corporate’s pharmaceutical business can deliver mid-single digit sales growth through 2030, he wrote in a December note.
J&J’s medical devices business can be becoming an even bigger share of the corporate’s revenue, which could help the corporate offset the Stelara patent cliff, CFRA analyst Sel Hardy said. The business raked in roughly $30 billion of J&J’s total $85 billion in 2023 sales.
Along with internal developments, firms will likely search for opportunities to accumulate more drugs, particularly those in late-stage development which might be near entering the market, said Arda Ural, EY’s Americas industry markets leader in health sciences and wellness.
The biotech and pharmaceutical industry can be starting the yr off with about $1.4 trillion readily available to make deals, he added.
Drugmakers buy more time
To avoid losing revenue, pharmaceutical firms are also moving to delay competition or extend patent protections on drugs.
Merck is testing a recent, more convenient version of Keytruda that might be injected under the skin fairly than through intravenous infusion. If that recent form is approved, it might land the corporate a separate patent and extend Keytruda’s market exclusivity by several years.
Bristol Myers Squibb can be testing a recent form of Opdivo, which is currently administered right into a patient’s veins. A version that is injected under the skin showed promising results in a late-stage trial in October, and will also result in prolonged market exclusivity.
Boxes of Opdivo from Bristol Myers are seen on the Huntsman Cancer Institute on the University of Utah in Salt Lake City, Utah, July 22, 2022.
George Frey | Reuters
J&J’s strategy with Stelara is a bit different.
In 2022, J&J sued Amgen over its plan to market a biosimilar for Stelara, saying it could infringe two patents for the drug. J&J confidentially settled that lawsuit in May, but will allow Amgen to sell its biosimilar of Stelara no later than 2025.
A month later, J&J reached similar settlements with Alvotech and Teva Pharmaceuticals, that are also planning to launch a biosimilar of Stelara.
“Pharma is doing what they will to ensure that that they squeezed that probably the most they will out of those drugs before they open up widely,” Mike Perrone, Baird’s biotech specialist, told CNBC. But he noted that “while you may tack on some years and extend revenues, there’s only a lot time you may add.”
Medicare drug price negotiations are an element
Medicare drug price negotiations under the Inflation Reduction Act are an extra threat to firms, but how the policy affects revenues could differ depending on when a drug loses exclusivity.
Medicare is starting price talks for the first round of 10 prescription medications this yr. The talks include Stelara and Eliquis, together with a couple of other treatments facing patent expirations.
By the autumn, the federal government will publish the agreed-upon prices for those medications, which can go into effect in 2026.
It’s too early to understand how much Medicare will have the option to barter down prices.
Activists protest the value of prescription drug costs in front of the U.S. Department of Health and Human Services (HHS) constructing on October 06, 2022 in Washington, DC.
Anna Moneymaker | Getty Images
But some experts said lower prices in 2026 can have less of an effect on drugs already expected to see revenue decline as patents expire around the identical time. For instance, Stelara will lose exclusivity within the U.S. in 2025.
It’s a rather different story for drugs that may face generic competition after 202https://www.fda.gov/about-fda/center-biologics-evaluation-and-research-cber/what-are-biologics-questions-and-answers. Perrone said a lower negotiated price on a drug will end in firms losing revenue earlier, before the patents expire.
Still, he said the larger threat to revenue for drugs – no matter after they lose exclusivity – is competitors entering the market, not a recent negotiated price with Medicare.