After years of disquiet and unpredictability in the pharma markets, a new age of megablockbusters, normalized M&A and more clarity around the Inflation Reduction Act has emerged, bringing the industry’s trajectory into better focus.
Following the COVID-19 pandemic, life sciences investment fell, and the sector struggled with strained cash for biotechs and an unwillingness on the part of Big Pharma to spend in the face of unknown risks.
Those concerns are beginning to abate thanks in part to the massive success of obesity medications and clarity around drug pricing provisions introduced by the Biden administration, according to a recent World Preview report this month from Evaluate.
“Last year’s age of uncertainty has given way to more predictable realities, including the dominance of obesity and other big diseases, a wider range of modalities and an IRA that’s here to stay,” the pharma intelligence analysts wrote.
Obesity’s reign
The GLP-1 market, including metabolic drugs from Novo Nordisk and Eli Lilly, is expected to bring in $130 billion by 2030, according to Evaluate, sending diabetes and obesity to the top of the ranks in product sales overall.
For those companies, sales have already propelled them to the top of the earners’ lists when just last year they were only flirting with the top 10, the analysts said.
“Barring major unforeseens, Novo and Lilly will remain at the top of the pile for the rest of the decade and likely beyond,” Evaluate said.
The booming market for obesity drugs has been a positive for the industry, with other pharmas looking at how they can jump into the fray, upping investments in next-generation drugs. Dependable sales from blockbusters are contributing to a less uncertain environment overall, and even today’s biggest players have been investing in new treatments poised for blockbuster status by the end of the decade.
Beyond the soaring GLP-1s, pharmas are looking to fill the gaps created by patent expirations. AbbVie’s Humira started facing U.S. competition last year while other blockbusters will soon fall off the cliff, including Merck & Co.’s Keytruda, Bristol Myers Squibb’s Opdivo, BMS and Pfizer’s Eliquis, Pfizer’s Ibrance and Lilly’s Trulicity. Between 2027 and 2028 these patent expirations will put $100 billion at risk, according to Evaluate.
But patent risks are known entities, and rising stars like AbbVie’s Skyrizi and Rinvoq, as well as the growing indication list behind Sanofi and Regeneron’s Dupixent are poised to bolster those lost brand name sales, the analysts said.
M&A back on track
Following a slump in dealmaking since 2021, 2023 marked a high point in overall M&A deal value in pharma, and 2024 is on track to surpass that. And both Big Pharma and smaller biotechs are set to benefit.
For Big Pharma, bringing new products into the pipeline helps offset losses from patent expirations and make the companies competitive in new therapeutic areas. Central nervous system deals like BMS’ Karuna Therapeutics purchase and cancer acquisitions like AbbVie’s Immunogen represent that kind of pipeline-building activity, but manufacturing capabilities are also at a premium, as shown by Novo’s Catalent deal, Evaluate pointed out.
Additionally, smaller deals are a way to build up an early-stage pipeline without putting as much up front.
“Smaller, bolt-on acquisitions — like Merck’s acquisitions of Harpoon or Abceutics, or Novartis’ purchase of auto-immune focused Calypso in early 2024 — are increasingly popular as they’re easier to integrate and less likely to fall foul of a still-hawkish Federal Trade Commission,” according to the Evaluate report.
For the biotechs at the other end of those deals, an acquisition can be a “lifeline” in a time of short cash runways and unreliable investment. And with the IPO market presenting a less certain way forward, M&A is often the best option, analysts said.
Outside forces
Pharmas have slowed R&D spend for a variety of reasons, from macroeconomic struggles to geopolitical tensions and a greater focus on M&A. But when it comes to regulations, changes from the IRA have become an inevitability companies will have to embrace.
But even with some legal challenges to the IRA still in the courts — and the potential for a new presidential administration in 2025 — the law is likely to prevail.
“With payers facing unprecedented numbers of new drugs, and the public lens still firmly focused on drug pricing, it is hard to imagine any U.S. government repealing the IRA,” Evaluate analysts said.
As biopharma markets come out of a yearslong journey of uncertainty, the clarity provided by a return to the basics could mean a stronger industry in the years to come.
