"As the drug company AbbVie began a new life of its own following a spinoff from Abbott Laboratories in 2013, it faced a challenge that would preoccupy Chief Executive Richard Gonzalez for the next decade: how to avoid sales falling off as competition to its top blockbuster neared. Back then, the arthritis drug Humira was generating about $9 billion in annual sales, about half the company's revenue. Wall Street loved Humira's growth, but investors worried about the patent expirations.
Humira went on to become one of the highest grossing drugs of all time, peaking at $21 billion in annual sales in 2022, and generating more than $200 billion in revenue throughout its lifetime. Those numbers blew past Wall Street analysts' wildest projections while giving the company time and cash to prepare for a future without Humira. Now that Humira is beginning to decline, Gonzalez can just about declare victory. AbbVie said on Friday that it expects its two newer anti-inflammatory drugs, Skyrizi and Rinvoq, which treat things such as Crohn's disease and arthritis, to bring in $16 billion in sales this year. By 2027, the company forecasts that figure to grow to $27 billion. Investors are pleased, with AbbVie's stock trading near a record.
How AbbVie navigated the decline of Humira holds powerful lessons for investors, drug companies and legislators. Key to AbbVie's financial success was a legal strategy that made it one of the most controversial drug companies. Through a wall of patents, which covered things such as manufacturing processes, it kept cheaper copies of Humira from entering the U.S. market even as they brought costs down in Europe years ago. Its approach got so much criticism that some industry insiders blame the Biden administration's Inflation Reduction Act -- a law empowering Medicare to negotiate some blockbuster drug prices -- on Humira.
"I call it the 'Humira bill,' and I'm not the only one," said John Maraganore, former founding CEO of Alnylam Pharmaceuticals, a biotech company developing RNA interference therapeutics. "The practices we saw with Humira were so egregious that I think it angered a lot of policymakers."
Legal warfare was one aspect of AbbVie's playbook. Even now, it continues to cash in on Humira by cutting large rebates to pharmacy-benefit managers, the middlemen responsible for designing formulary plans for patients. That approach makes it hard for developers of cheaper copycats to compete. AbbVie on Friday reported Humira revenue in 2023 was $14.4 billion despite the entry of biosimilars. As biosimilar competition intensifies this year, the company is forecasting a decline to $9.6 billion in sales for the drug. While policymakers such as Sen. Bernie Sanders vilified AbbVie's "corporate greed," the company's maneuvers are arguably just as reflective of problems with America's patent and healthcare systems. "I think it's what any rational actor would do in a healthcare system that essentially is broken," says Piper Sandler analyst Christopher Raymond. "From a business perspective, their execution has been flawless."
Humira will continue to decline, with analysts expecting it to drop to about $4 billion in sales by 2028. But turning what could have been a cliff into a gentle glide path can make all the difference by allowing a drug company to use the extra time and cash flow to fund acquisitions and develop the next group of products. In December, the Chicago-area company announced $19 billion in acquisitions in cancer and neurology.
Merck finds itself in a similar predicament to where AbbVie was a few years back. Merck's cancer immunotherapy, Keytruda, took Humira's place in 2023 as the top-grossing drug, bringing in $25 billion in sales, about 40% of Merck's sales. While Keytruda and Humira are used in very different disease areas, they are both what industry insiders call a pipeline in a pill: drugs that grow as they receive more Food and Drug Administration approvals for related diseases. Keytruda has 35 approvals across 16 cancers. Humira racked up approvals across the immunology space from Crohn's disease to rheumatoid arthritis to psoriasis. The pipeline in a pill model holds several advantages, such as the reduced need for early-stage safety studies as well as marketing and manufacturing efficiencies. The downside is that the company could become overly reliant on the success of one drug.
Like AbbVie, Merck is eager to extend the drug's life in any way possible. While the key patents on the drug expire in 2028, the company filed dozens of patents covering different aspects of the drug such as new formulations in an attempt to create a similar patent thicket for Keytruda. One key new formulation is an easier-to-administer injectable, which could help it stave off generics by moving patients over from the IV version. Last year, Sen. Elizabeth Warren wrote the head of the Patent and Trademark Office, accusing Merck of trying to extend its "monopoly power" by filing over 100 patents in an effort to extend the period of exclusivity of the drug. Additionally, Merck is hoping some of the thousands of clinical trials combining cancer drugs with Keytruda will pan out, extending the life of the product.
In the meantime, Merck executives signaled during an earnings call last week they would be open to deals valued at as much as $15 billion. Merck is one of many drug companies trying to keep sales of their cash cows going beyond patent expiries. Regeneron has been working hard to convert patients to a higher-dose version of the blockbuster Eylea drug, which treats a vision disease known as wet macular degeneration.
Innovation remains key to drug companies' success. But that can mean coming up with innovative ways to squeeze more years and money out existing drugs." [1]
Talk about a professional way to cut the branch you're sitting on by recalling the Biden administration's Inflation Relief Act, a law that authorized Medicare to negotiate the prices of some popular drugs, reducing profits for everyone.
1. Blockbuster Drug Offers Lessons. Wainer, David. Wall Street Journal, Eastern edition; New York, N.Y.. 06 Feb 2024: B.12.
Komentarų nėra:
Rašyti komentarą