Amgen, BMS and Merck have the most exposure as Big Pharma eyes $183B patent cliff: analyst

 While patent cliffs are looming for many of biopharma’s top-selling products, the industry has enormous capacity to respond as “conditions for M&A are favorable,” according to a research note from Morgan Stanley.

In the July 11 report, the analysts calculate that products losing exclusivity through 2030 are generating a combined $183.5 billion in annual sales, with Amgen, Bristol Myers Squibb and Merck facing the most exposure of their revenue.

Meanwhile—citing company financial reports and data from Visible Alpha and FactSet—Morgan Stanley estimates that Big Pharma has $383.1 billion of firepower available for dealmaking. The companies sitting on the most dry powder are Johnson & Johnson, Merck and Novo Nordisk, the analysts said.

"We continue to see the conditions as generally favorable for bolt-on M&A as large-cap pharma companies have balance sheet capacity and a need to acquire outer-year revenue," the Morgan Stanley team, led by Terence Flynn, Ph.D., wrote.

Per Morgan Stanley’s metrics, J&J is in excellent shape as just 33% of its revenue is exposed to patent expirations through 2030, compared to an industry average of 38%. Other biopharma companies in good positions regarding their patent cliffs are Vertex (6%), Gilead (24%), AbbVie (29%), Eli Lilly (31%) and Pfizer (33%).   

At the other end of the list, Amgen has the most revenue at risk at 67%, with its top four products on the clock. Bone cancer drugs Prolia and Xgeva, which combined for sales of $6.1 billion last year, are due for patent expirations over the next two years. Enbrel ($3.7 billion) and Otezla ($2.2 billion) also are set to lose exclusivity by the end of the decade.

Amgen, of course, has already taken a major step in addressing the patent cliff with its $27.8 billion acquisition of Horizon, which was completed in October and brought potential blockbusters in Tepezza for thyroid eye disease, Krystexxa for gout and Uplizna for a rare neurologic disorder.

Next on the patent cliff exposure list is BMS, with 63% of its revenue at risk. Blood thinner Eliquis, which generated $12.2 billion last year, and cancer drug Opdivo ($9 billion) are on the clock in the next few years while another cancer treatment, Revlimid ($6.1 billion), has already lost its U.S. exclusivity.  

BMS also has addressed its cliff, acquiring Karuna, Mirati and RayzeBio in a three-month splurge at the end of 2023. Last month, BMS CEO Chris Boerner said that the company’s still scouting out deals.

"Despite these transactions, there remains significant LOE exposures for many of these companies," the analysts wrote. "Further, uncertainty related to the FTC's approach to pharma transactions, which we believe may have impacted deal appetites in the 2022-2023 period, seems to have largely subsided at this point following the closure of larger transactions in recent months."

It’s no surprise that Merck is on the list, with 56% of its revenue exposed to patent expirations. Most of that comes from mega-blockbuster cancer drug Keytruda, which generated $25 billion in sales last year, accounting for 42% of the company’s total haul. Keytruda is set to lose its exclusivity in 2029.

"Merck continues to have the combination of need to offset the Keytruda LOE and meaningful balance sheet capacity," the Morgan Stanley analysts wrote. "AbbVie, BMS and Pfizer have all recently transacted, so we see these companies as more likely to be acquirers over the medium term." 

https://www.fiercepharma.com/pharma/firepower-aplenty-and-patent-cliffs-ahead-time-right-ma-activity-report