Bristol joins the pharma buyers club

Two years ago, Bristol-Myers Squibb was the only big pharma player eschewing the prevailing trend of buying in innovation. Fast forward to 2019 and the company, which is awaiting the closure of its acquisition of Celgene, has fallen into line with its peers.

EvaluatePharma data reveal that, if the deal goes through as expected, in-house sales will account for just 14% of Bristol’s total 2019 revenues, the same proportion as in 2010. Without Celgene, Bristol would have been the only member of the big cap cohort to increase its contribution from internally developed projects.

This mirrors the picture seen in 2017 when Vantage last carried out this analysis (Only Bristol bucks big pharma’s drive for external reliance, June 21, 2017).

Bristol has clearly since decided that if it cannot beat its rivals it might as well join them. There is still the chance that the Celgene takeout might not close, but it is looking more likely after Bristol sold Celgene’s psoriasis drug Otezla to Amgen to satisfy antitrust concerns.

The companies with the biggest contribution from in-house products remain Lilly, Astrazeneca and Roche. Many of Roche’s bestsellers originated at Genentech, but these are classified as internally developed for the purposes of this analysis, since the Swiss group has had a majority stake in the biotech since 1990.

While Astra has continued to avoid big buyouts in recent years the picture looks to be changing at Lilly and Roche, with the former recently shelling out for Loxo and Armo, and the latter turning to chunky bolt-ons like Foundation Medicine and Spark – although the latter deal is still in doubt after being extended yet again this month for antitrust review.

Looking externally

Glaxosmithkline is another group that has long championed internal R&D but appears to be changing tack. Its chief executive, Emma Walmsley, has signalled a greater willingness to do deals, particularly in oncology, with the group’s most notable move so far being the $5bn takeout of Tesaro.

But any new focus will take a while to filter through to sales; in the meantime, falling Advair revenues provide an explanation for the decline in Glaxo’s in-house product share. And internal projects will still play an important role in the group’s future, with its biggest seller in 2024 set to be the shingles vaccine Shingrix.

Novartis is in a similar boat, with sales of its internally developed blockbuster Gleevec plummeting in recent years. The group has also been striking more deals of late, but the jury is still out over its biggest recent purchase – that of Avexis. There were already questions over the sales potential of that company’s SMA gene therapy, Zolgensma, even before the recent data manipulation controversy.

Meanwhile, Merck & Co’s apparent reliance on external projects should be taken with a pinch of salt. The company’s biggest growth driver has been Keytruda, gained via the Schering-Plough takeover, but Merck took the PD-1 inhibitor on at a very early stage and did much of the development itself. Merck’s reliance on Keytruda will only continue: the drug is forecast by the sellside to bring in a staggering $17.5bn by 2024.

Bristol’s rival checkpoint inhibitor Opdivo is similar in that it too is technically an external project. Opdivo originated at Ono Pharmaceuticals, but again was largely developed by the big pharma. Opdivo is set to sell $10bn in 2024, putting it some way behind Keytruda. This perhaps helps explain why Bristol turned to M&A, joining the likes of Sanofi, Johnson & Johnson and Pfizer as the groups most reliant on external innovation.

J&J and Pfizer are among the top three big pharmas in terms of 2019 sales, so a deal-heavy strategy has not hurt them. Bristol will hope to be able to say the same if and when the Celgene deal closes.