A series of mega-blockbuster drugs are on the horizon. How to invest in the trend
Biopharma companies are having more clinical success treating Alzheimer’s and obesity, and are pursuing new approaches in oncology, creating more mega-blockbuster drugs, according to Bank of America. Analyst Geoff Meacham has identified 20 drugs that have the potential to generate $10 billion or more in annual sales by 2030 within the universe of companies it covers. “Based on our analysis, most mega-blockbusters share some common attributes, including: 1) large addressable populations, 2) long durations of therapy, and 3) cheap prices,” Meacham said in a Friday research note. “However, the biggest drugs tend to exhibit one or, at best, two of these properties.” For example, a drug like the Covid-19 vaccine Comirnaty (Pfizer/BioNTech) or Spikevax (Moderna) can be priced low but huge Reach mega-blockbuster status in the patient market. A drug can also end up in this group if it treats fewer patients at a higher cost, like Merck’s cancer drug Keytruda. Seven drugs on Meacham’s list are already on the market and have reached $10 billion or more. These include Pfizer’s Covid-19 drug Paxlovid, AbbVie’s arthritis drug Humira, and Gilead’s HIV/AIDS drug Biktarvy. This means that some of these drugs may already be approaching the end of their peak selling season. Meacham places Humira and the Covid vaccines in this category. That leaves 13 drugs that haven’t hit the mark yet. A part of the names on this list are still in an early stage of development and therefore carry some risks, such as B. the potential for the drug not to clear regulatory hurdles, meet clinical trial goals, or be pushed back by health insurance companies in pricing and coverage. Meacham has previously said that one of the drugs in that bucket, Eli Lilly’s Tirzepatide, could be the first $100 billion drug. It’s already approved to treat type 2 diabetes, and sales are off to a strong start. But many investors are hopeful about its potential as a treatment for obesity. On Thursday, tirzepatide received word from the Food and Drug Administration that the agency would expedite review of the application for this use. That means tirzepatide could win approval for the treatment of obesity as early as late 2023 or early 2024. However, Meacham’s stunning sales forecast is based on the expectation that the drug will also be used to treat other conditions such as NASH, sleep apnea, kidney disease and heart failure. “From our analysis, we believe that Lilly’s tirzepatide could uniquely capture all three market drivers, dramatically given the significant development investments made across many indications. We think that’s what investors will do given the acute focus on just T2D and obesity,” he said. Lilly’s shares are up 18% year-to-date. It reached an all-time high of $341.70 on September 28th. Bristol Myers’ Keytruda and Opdivo have already achieved blockbuster status in cancer treatments, but biopharmaceutical companies are looking at combination immuno-oncology therapies. An example given by Meacham is Opdualag, which has been approved for the treatment of metastatic melanoma. Bristol is exploring its potential to treat liver and lung cancer, which if successful could significantly accelerate Opdualag’s sales growth, he said. Bristol shares are up nearly 12% year-to-date, while Merck shares are up 14% over the same period. Finding effective treatments for Alzheimer’s has historically proven a challenge, but recent results from a large, late-stage clinical trial of lecanemab, a treatment from Biogen and Eisai, have encouraged investors. This new drug appears to be helping patients more than Biogen’s previous treatment, Aduhelm. This drug received FDA approval, but then struggled after Medicare reduced coverage of the treatment. But the new drug appears to be more successful at slowing a patient’s cognitive decline. Hopes for the drug have catapulted Biogen stock. The stock is up more than 42% year-to-date. Lilly also has an Alzheimer’s treatment, donanemab. Updates from the Phase 3 study are expected by mid-2023. Meacham said he expects multiple Alzheimer’s treatments to be able to coexist due to the large patient population. “We anticipate significant growth for lecanemab if it can achieve broad coverage [the Centers for Medicare & Medicaid Services]and could become Biogen’s top-selling product, offsetting the decline in sales of other products,” he said.