Big pharma is at a crossroads, as J&J, Merck and others prepare to lose heaps of revenue from blockbuster drugs

The New York Stock Exchange welcomes Johnson & Johnson (NYSE: JNJ) to the rostrum. 


Big pharmaceutical corporations such as Bristol Myers Squibb, Merck and Johnson & Johnson face a looming risk that can put tens of billions of {dollars} in sales at risk between now and 2030, as blockbuster drugs will tumble off a so-called patent cliff.

That refers to when a firm’s patents for a number of main branded merchandise expire, which opens the door for opponents to promote copycats of these drugs, usually at a cheaper price. That sometimes causes revenue to fall for drugmakers and prices to drop for sufferers, who can entry extra reasonably priced choices.

Certain drugmakers seem effectively ready to offset some losses from upcoming patent cliffs, as they construct their drug pipelines and ink acquisitions or partnerships with different corporations, some Wall Street analysts mentioned.

Patent cliffs are an unavoidable problem for pharmaceutical corporations. They should replenish older top-selling drugs with new ones that they hope is not going to simply maintain their gross sales, but in addition develop them.

The loss of unique rights on a drug can have an effect on corporations in another way, relying on how a lot of their gross sales they get from the product or what sort of therapy it is. Some drugs going through patent expirations can even be topic to the Biden administration’s Medicare drug price negotiations, a coverage which will additional threaten the businesses’ revenues. 

The prime 20 biopharma corporations have $180 billion in gross sales at threat from patent expirations between now and 2028, in accordance to estimates from EY.

“It does differ by firm at this stage, and I feel there are a quantity of merchandise within the ’25, ’30 timeframe that shall be main development drivers for giant biopharma corporations … however all in all, there are a lot of corporations which have revenue holes to plug,” William Blair & Company analyst Matt Phipps advised CNBC.

Some prime drugs set to lose exclusivity

Merck’s Keytruda is an immunotherapy that treats melanoma, head and neck, lung and different sure sorts of cancers.

  • Key patent expirations: 2028
  • 2022 gross sales: $20.94 billion 
  • Percentage of firm’s whole 2022 gross sales: Roughly 36%
  • Estimated future revenue: $14.9 billion in 2030, in accordance to Guggenheim estimates.

Bristol Myers Squibb’s Eliquis is a blood thinner used to forestall clotting, to scale back the danger of stroke.

  • Key patent expirations: 2026 to 2028
  • 2022 gross sales: $11.79 billion
  • Percentage of firm’s whole 2022 gross sales: Around 25%
  • Estimated future revenue: $478 million in 2032, in accordance to Leerink Partners estimates.

Bristol Myers Squibb’s Opdivo is an immunotherapy used to deal with cancers, together with melanoma and lung most cancers. 

  • Key patent expirations: 2028
  • 2022 gross sales: $8.25 billion 
  • Percentage of whole 2022 gross sales: Almost 18%
  • Estimated future revenue: $3.18 billion in 2032, in accordance to Leerink Partners estimates.

Johnson & Johnson’s Stelara is an immunosuppressive medicine used to decrease irritation and deal with a number of situations, together with plaque psoriasis and psoriatic arthritis. 

  • Key patent expirations: 2024 in Europe, 2025 within the U.S. (Stelara’s patents started to expire within the U.S. final yr, however the firm struck offers with opponents to delay the launches of copycat drugs).
  • 2022 gross sales: $10.86 billion
  • Percentage of whole 2022 gross sales: Around 12%
  • Estimated future revenue: $2.63 billion in 2028, in accordance to FactSet estimates.

The sort of drug issues

Patent cliffs might differ relying on whether or not the product is a small-molecule drug – which means it is made of chemical substances which have low molecular weight – or a biologic, or a drugs derived from residing sources such as animals or people.

Many of the largest drugs going through upcoming patent expirations are biologics, together with Merck’s Keytruda, J&J’s Stelara and Bristol Myers Squibb’s Opdivo. Those drugs will inevitably rake in much less revenue, however it might take time earlier than so-called biosimilars threaten their dominance. 

Investors will get updates on Merck and Bristol Myers Squibb’s plans for the years forward once they report earnings on Thursday and Friday, respectively.

Phipps mentioned biosimilars have traditionally “had bother gaining market share” from their branded counterparts. That’s not like generics, that are cheaper copycats of small-molecule drugs like Bristol Myers Squibb’s Eliquis

The distinction is that many biosimilars aren’t identical copies of branded biologic drugs, whereas generics are. 

That means biosimilars are usually not interchangeable: Pharmacists cannot instantly substitute a branded biologic for a biosimilar when filling a prescription. Not all sufferers will react to a biosimilar in the identical method as they do to a biologic, which makes some physicians extra cautious of switching sufferers to them.

Biosimilars additionally cost much more to analysis and develop, and are extra advanced to manufacture, than generics, making biosimilar makers much less keen to promote them at vital reductions to branded counterparts, Phipps famous. 

Humira, the injectable rheumatoid arthritis therapy is pictured in a pharmacy in Cambridge, Massachusetts.

JB Reed | Bloomberg | Getty Images

One instance is AbbVie‘s Humira, a biologic that helps deal with an array of inflammatory illnesses. Several biosimilars of Humira debuted available on the market final yr, however the drug has thus far only lost 2% of its market share to these copycats, in accordance to a report launched this month by Samsung’s biopharmaceutical subsidiary, Bioepis. 

That’s partly as a result of the drugmaker has supplied rebates on Humira to pharmacy profit managers. Its cheaper price has minimize revenue, but it surely is additionally serving to the drug keep aggressive.

“What’s actually impacted is not quantity available in the market, it is value,” Piper Sandler senior analyst Christopher Raymond mentioned. He added that Humira is a extremely worthwhile drug, so AbbVie can set a cheaper price and “nonetheless keep a very, very respectable margin.”

Still, AbbVie expects that Humira’s revenue declined by 35% final yr in contrast to 2022, when the drug raked in additional than $21 billion.

Raymond forecasts a 33% drop in 2023 and an equivalent 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 enhance, and expects the biopharmaceutical business’s gross sales to be “roughly secure” by means of 2030, analyst Chris Schott mentioned in a be aware in December. 

Take Merck: Schott wrote in a January be aware that the corporate “has made substantial progress in addressing its publish Keytruda” patent expiration, including that the corporate’s “publish 2028 profile is wanting more and more enticing.”

During the JPMorgan Health Care Conference earlier this month, Merck CEO Robert Davis mentioned the corporate expects to have greater than $20 billion in gross sales from oncology drugs by the mid-2030s, which is double the forecast the corporate supplied throughout the identical time final yr. 

That improved outlook now consists of three antibody-drug conjugates – which goal most cancers cells and decrease harm to wholesome ones – from the licensing agreement Merck inked with Daiichi Sankyo in October. It additionally consists of Merck and Moderna‘s customized most cancers vaccine, which has yielded promising mid-stage data when mixed with Keytruda to deal with probably the most lethal kind of pores and skin most cancers. 

The firm additionally hiked its revenue outlook for cardiometabolic drugs to round $15 billion by the mid-2030s, up from a earlier steering of $10 billion. 

Davis famous that Merck views Keytruda’s patent expiration as a “hill, not a cliff,” and is centered on making “the dip as small as potential and the return to development as quick as potential.”

Meanwhile, JPMorgan’s Schott mentioned shares of Bristol Myers Squibb had a difficult 2023, as new drugs ramped up “slower than anticipated.”

But JPMorgan expects these new merchandise, together with the drugmaker’s latest acquisitions and rising mid- to late-stage pipeline, will “in the end place the corporate for development” after upcoming patent expirations. For instance, Bristol Myers Squibb acquired Karuna Therapeutics, which develops drugs for psychiatric and neurological situations, for $14 billion in December.

Meanwhile, Schott mentioned he believes J&J is “effectively positioned for wholesome development” after Stelara’s patent expires. The agency believes the corporate’s pharmaceutical enterprise can ship mid-single digit gross sales development by means of 2030, he wrote in a December be aware.

J&J’s medical devices business is additionally turning into a larger share of the corporate’s revenue, which might assist the corporate offset the Stelara patent cliff, CFRA analyst Sel Hardy mentioned. The enterprise raked in roughly $30 billion of J&J’s whole $85 billion in 2023 gross sales. 

In addition to inside developments, corporations will seemingly search for alternatives to purchase extra drugs, notably these in late-stage improvement which might be shut to coming into the market, mentioned Arda Ural, EY’s Americas business markets chief in well being sciences and wellness.

The biotech and pharmaceutical business is additionally beginning the yr off with about $1.4 trillion available to make offers, he added.

Drugmakers purchase extra time

To keep away from shedding revenue, pharmaceutical corporations are additionally shifting to delay competitors or lengthen patent protections on drugs. 

Merck is testing a new, more convenient version of Keytruda that may be injected beneath the pores and skin fairly than by means of intravenous infusion. If that new kind is authorised, it might land the corporate a separate patent and lengthen Keytruda’s market exclusivity by a number of years. 

Bristol Myers Squibb is additionally testing a new form of Opdivo, which is presently administered into a affected person’s veins. A model that is injected beneath the pores and skin confirmed promising results in a late-stage trial in October, and might additionally lead to prolonged market exclusivity.

Boxes of Opdivo from Bristol Myers are seen at the Huntsman Cancer Institute at the University of Utah in Salt Lake City, Utah, July 22, 2022.

George Frey | Reuters

J&J’s technique with Stelara is a bit totally different.

In 2022, J&J sued Amgen over its plan to market a biosimilar for Stelara, saying it will infringe two patents for the drug. J&J confidentially settled that lawsuit in May, however will permit Amgen to promote its biosimilar of Stelara no later than 2025. 

A month later, J&J reached similar settlements with Alvotech and Teva Pharmaceuticals, that are additionally planning to launch a biosimilar of Stelara

“Pharma is doing what they will to ensure that they squeezed that probably the most they will out of these drugs earlier than they open up broadly,” Mike Perrone, Baird’s biotech specialist, advised CNBC. But he famous that “whilst you can tack on some years and lengthen revenues, there’s solely a lot time you possibly can add.” 

Medicare drug value negotiations are a issue

Medicare drug value negotiations beneath the Inflation Reduction Act are an extra risk to corporations, however how the coverage impacts revenues might differ relying on when a drug loses exclusivity. 

Medicare is starting value talks for the first round of 10 prescription medications this yr. The talks embrace Stelara and Eliquis, together with a few different remedies going through patent expirations. 

By the autumn, the federal authorities will publish the agreed-upon costs for these medicines, which is able to go into impact in 2026. 

It’s too early to know the way a lot Medicare shall be in a position to negotiate down costs. 

Activists protest the worth of prescription drug prices in entrance 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 specialists mentioned decrease costs in 2026 could have less of an effect on drugs already anticipated to see revenue decline as patents expire across the similar time. For instance, Stelara will lose exclusivity within the U.S. in 2025. 

It’s a barely totally different story for drugs that can face generic competition after 202 Perrone mentioned a decrease negotiated value on a drug will lead to corporations shedding revenue earlier, earlier than the patents expire. 

Still, he mentioned the larger risk to revenue for drugs – regardless of once they lose exclusivity – is opponents coming into the market, not a new negotiated value with Medicare.

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