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$383.1B M&A Strategies By Biopharma For Patent Expirations

Content Team by Content Team
19th July 2024
in News

Note* - All images used are for editorial and illustrative purposes only and may not originate from the original news provider or associated company.

The biopharma industry is well-positioned to respond to upcoming patent expirations by pursuing mergers and acquisitions, according to a research note from Morgan Stanley. The report, dated July 11, states that products losing exclusivity through 2030 generate a combined $183.5 billion in annual sales, with Amgen, Bristol Myers Squibb, and Merck facing significant exposure of their revenue.

Morgan Stanley estimates that Big Pharma has $383.1 billion available for dealmaking, citing company financial reports and data from Visible Alpha and FactSet. Johnson & Johnson, Merck, and Novo Nordisk are identified as the companies with the most resources for potential deals.

The analysts at Morgan Stanley, led by Terence Flynn, Ph.D., conveyed that they continued to see the conditions as generally favorable for bolt-on M&A since large-cap pharma companies have balance sheet capacity as well as a requirement so as to acquire outer-year revenue.

J&J is in a strong position, with only 33% of its revenue exposed to patent expirations through 2030, compared to an industry average of 38%. Other biopharma companies having favorable positions with regards to their patent cliffs include Vertex- 6%, Gilead at 24%, AbbVie- 29%, Eli Lilly- 31% as well as Pfizer at 33%.

On the other hand, Amgen faces the greatest revenue risk at 67%, with its top four products at risk due to patent expirations. Prolia, Xgeva, Enbrel, and Otezla are set to lose exclusivity by the end of the decade, posing significant challenges for the company.

Amgen addressed the patent cliff situation with its $27.8 billion acquisition of Horizon in October, which brought potential blockbusters in Tepezza, Krystexxa, and Uplizna. However, the analysts highlighted that there are still significant exposure risks for many companies, and uncertainty related to the FTC’s approach to pharma transactions may have impacted deal appetites in the past.

Merck also faces challenges, with 56% of its revenue exposed to patent expirations, primarily due to the impending loss of exclusivity for the mega-blockbuster cancer drug Keytruda, which accounted for 42% of the company’s total sales last year. The analysts emphasized that Merck needs to offset the Keytruda loss with meaningful balance sheet capacity. They also suggested that AbbVie, BMS, and Pfizer are more likely to pursue acquisitions over the medium term, given their recent transaction activities.

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