Wrapup 3: Drugmakers scout for deals, ramp up research spending

Prometheus Biosciences

27/04/2023 23:14

(Adds analyst comments, Amgen and Gilead earnings; updates
shares)
    By Manas Mishra and Patrick  Wingrove
       April 27 (Reuters) - Drugmakers including Merck & Co
 MRK.N , AstraZeneca Plc  AZN.L  and AbbVie Inc  ABBV.N  said on
Thursday they are open to acquisitions and reported a ramp up in
research and development spending as the industry's larger
players look for new sources of future revenue. 
    Several top drugs such as AbbVie flagship Humira have begun
to face competition from new rivals or are expected to lose
patent protections in the next few years, and deals could be a
quick fix to address the loss of revenue from older therapies.
    Merck recently announced a $10.8 billion deal to buy
Prometheus Biosciences Inc  RXDX.O .
    Chief Executive Robert Davis said that deal does not change
the company's business development strategy. 
    "We're focused on building the pipeline, both near and long
term, and we do deals across the full spectrum," he said.
    Sales of Merck's cancer immunotherapy Keytruda will start
losing patent protections in 2028. Meanwhile, it has become the
world's top selling prescription drug with first-quarter sales
of $5.8 billion, exceeding even analysts' lofty estimates.
    Guggenheim analyst Seamus Fernandez said pharmaceutical
patent expirations will accelerate from 2026 to 2032 and that
most will face competition from biosimilars that compete with 
complex biologic drugs.
    A drop in valuation of smaller U.S. biotech companies from
pandemic highs has made deals more attractive, and the collapse
of top venture debt provider Silicon Valley Bank (SVB) is
expected to worsen a funding drought for those companies. 
    "It's certainly more difficult to raise money for a biotech
company. So it probably makes them a bit more willing to engage
with players like us," said an AbbVie executive during a call to
discuss first-quarter results. 
    AbbVie on Thursday reported sales that missed estimates for
most treatments, including its blockbuster arthritis drug
Humira, and its shares closed down 8%.
    Humira's U.S. sales fell 26.1% in the quarter to $2.95
billion as it faced its first biosimilar competition from
Amgen's  AMGN.O  Amjevita, and AbbVie forecast a steeper erosion
in Humira's market share in the second quarter.
    Amgen, which launched Amjevita in January, slightly
increased its forecast for full-year 2023 revenue to $26.2
billion to $27.3 billion, from the previous outlook of $26
billion to $27.2 billion. 
    That excludes the impact of Amgen's pending $27.8 billion
acquisition of Horizon Therapeutics Plc  HZNP.O , which the
company still expects to complete in the first half of this
year.
    Like Merck, AstraZeneca continues to reap the rewards of 
patent-protected cancer therapies for now.
    AstraZeneca beat first-quarter estimates as sales of Imfinzi
and strong demand in China helped soften the hit from falling
sales of COVID-19 drugs.
    The Britain-based drugmaker re-emphasized its focus in
China, aiming to seize the opportunity to treat patients as the
country bounces back from a protracted period of severe COVID
restrictions.
    In the last few months, AstraZeneca signed three licensing
deals with Chinese companies, said CEO Pascal Soriot, adding
that more, possibly larger moves are being contemplated.  
    "We definitely could make acquisitions. There is no
limitation to this," Soriot said.
   
    R&D SPENDING RAMPS UP 
    Most drugmakers reporting on Thursday beat Wall Street
estimates for first-quarter earnings, while Eli Lilly and Co
 LLY.N  missed mainly due to higher costs. 
    "You gotta spend money, to make money!," BMO Capital Markets
analyst Evan Seigerman said of Lilly's results. 
    Research and development (R&D) costs at other drugmakers
also rose in the quarter.
    Merck reported a 66% jump in R&D costs, attributing about
$1.2 billion to a charge from its acquisition of Imago.
AstraZeneca's R&D spending rose 22% in the quarter.
    Amgen said its R&D costs rose 12% in the first quarter,
while Gilead Science Inc  GILD.O  reported a 25% research
spending jump to $1.4 billion, driven partly by higher expenses
in late-stage clinical studies.
    Gilead said it also expected full-year R&D expenses to rise
to a low-double-digit percentage compared to 2022.
    "We believe that there's a more appropriate level of
investment for a company with a broad late-stage clinical
portfolio that is targeting attractive opportunities and
sustainable revenue growth," said Chief Financial Officer Andrew
Dickinson.
 
    Share movements were mixed on Thursday.
    Eli Lilly shares closed 3.7% higher after it raised its
annual revenue and profit forecasts on demand for its closely
watched diabetes drug Mounjaro, which is being used off-label as
an obesity treatment.
    Merck's shares had been down earlier but closed up $1.5%,
while shares of Bristol Myers Squibb  BMY.N  fell 0.6% after it
missed first-quarter sales estimates.
    Shares of both Amgen and Gilead were down more that 2% in
after hours trading. 
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Drugmakers ramp up R&D spending    https://tmsnrt.rs/3ncB64X
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Bhanvi Satija, Leroy Leo, Raghav Mahobe in
Bengaluru, Natalie Grover in London, Michael Erman and Patrick
Wingrove in New York; Writing by Manas Mishra; Editing by
Caroline Humer and Bill Berkrot)
 ((Manas.Mishra@thomsonreuters.com;
www.twitter.com/Manaswrites15;))