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Megadeal Roundup: Bristol-Myers, Pfizer, AbbVie chiefs deliver merger updates

Executives from the largest pharmaceutical companies in the world gathered in New York City to discuss the state of their business at the Morgan Stanley Global Healthcare Conference from Sept. 9-11. Three of the year's iconic mergers commanded center stage as the deals approach closing.

SNL Image

Bristol-Myers Squibb CEO Giovanni Caforio

Source: Bristol-Myers Squibb

Bristol-Myers Squibb Co.'s $95 billion acquisition of Celgene Corp. announced in early January has hit a few bumps in the road from shareholders and the U.S. Federal Trade Commission, but CEO Giovanni Caforio said Celgene's pipeline is a strong indication that everything is on track.

"The pipeline has continued to progress and particularly on the Celgene side because of the large number of late-stage assets and expected launches," Caforio said. "We've seen the progress of the pipeline, I would say, in line with our expectation."

In some ways, he said the progress has exceeded expectations with regard to the in-line business.

Caforio mentioned the filing of Celgene's anemia drug luspatercept with the U.S. Food and Drug Administration as a particular high point. The therapy is listed as the company's lead product candidate.

Another prospect is a cell therapy called JCAR017 for patients with non-Hodgkin's lymphoma, for which the company expects to reveal results in December. In the growing field of cell therapies, called chimeric antigen receptor T cell therapies, it is one of two that Celgene is developing.

Caforio addressed one of the main concerns that shareholders have expressed with regard to the deal, which is potential competition with Celgene's cancer drug Revlimid. Celgene has prevailed in two intellectual property suits and has settled with another generics-maker, Alvogen Inc., Caforio said. Revlimid will see limited competition from generic copies in 2022, with open season beginning in 2026.

Although further megadeals will be off the table for Bristol-Myers in the near future, Caforio said bolt-on deals to boost certain areas of the company are certainly part of the ongoing strategy. He said the company's free cash flows are expected to exceed $45 billion in the first three years following the closure of the Celgene deal to support those efforts.

"We feel comfortable that we'll have, from the start, the financial flexibility to continue to invest in bringing external innovation into the company," Caforio said.

Pfizer to be 'a dramatically different company'

Pfizer Inc. Chief Financial Officer Frank D'Amelio said that after the company's Upjohn generics arm joins with Mylan NV, what remains of the New York pharmaceutical giant will be "a dramatically different company than what we've been in the past."

What has plagued Pfizer in years past has been competition as its flagship products lose exclusivity in the market. For example, painkiller Lyrica most recently fell off what is called the "patent cliff" in the middle of 2019, resulting in immediate generic competition and revenue losses.

But those patent losses will become less and less of a burden over the next half-decade, according to D'Amelio. This year, he expects about $2.4 billion in losses from generic competition. The losses should fall to $2 billion in 2020, less than $1 billion in 2021, and less than $500 million in the years 2022-2025.

D'Amelio said the drop in losses from patent erosion is a double-edged sword: It means Pfizer was not doing enough in research and development leading up to this point, and even though the company now has the ability to apply efforts there, operational costs will be higher.

That is what made off-loading the Upjohn division a smart move at this time because that arm would collect on generic versions of those same branded drugs. It also allows the "new" Pfizer to focus on innovation in R&D to develop new branded blockbusters, D'Amelio said.

"From my perspective, what we did in terms of becoming the pure innovative play, the timing of this really couldn't be better," D'Amelio said.

Beyond this merger, D'Amelio denied that Pfizer would be on the lookout for any megadeals and will instead focus on core therapeutic areas, similar to the company's acquisition of Array BioPharma earlier in the year.

Building up AbbVie as Allergan deal looms

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AbbVie CEO Richard Gonzalez

Source: AbbVie

The big question for AbbVie Inc. has been and will likely continue to be what happens in 2023 when competition to Humira — the best-selling drug in the world in 2018 — enters the market, AbbVie CEO Richard Gonzalez said at the Morgan Stanley conference.

"Part of our strategy back in 2013 was to basically build the pipeline that was capable of being able to continue to grow, knowing full well that our single-largest product, Humira, would face biosimilar competition," Gonzalez said. "It was just a question of when, not a question of if. And we built a strategy designed to be able to deliver against that objective."

Since the announced acquisition of Allergan PLC in June, AbbVie has added two new products to its roster: the psoriasis drug Skyrizi, launched in May, and the rheumatoid arthritis drug Rinvoq in late August.

With Skyrizi and Rinvoq now on the market, along with Humira, Gonzalez said the inflammation market is still well in hand, particularly in Skyrizi's case, which is tracking better in patient uptake than Humira did at launch.

In eye care, central nervous system and gastroenterology products along with Allergan's Botox-led aesthetics lineup, Gonzalez said the future is looking much better in the long-term than some analysts might have expected at the outset of the deal.

"When you combine all of these assets together, you will end up with a strong, high-performing biopharmaceutical company that is underpinned by four or five different major growth franchises, all having the ability to be able to grow over the long term," Gonzalez said.

Allergan has some legacy issues with the opioids it once manufactured, but Gonzalez is confident AbbVie would be free of major litigation down the road.

"Nothing that has transpired over the course of the last couple of months has changed our position on that," Gonzalez said of the opioid issue. "So I'd say we're confident in the position that we have around Allergan."