Drug deals, launches in focus as pharma earnings begin

Even as biotechnology companies have struggled in 2022, with the stock values of many declining significantly, large pharmaceutical companies have fared comparatively better. Shares in Eli Lilly, Merck & Co. and Bristol Myers Squibb are at or near 5-year highs, while companies like Pfizer continue to benefit from their COVID-19 work. 

Interest rates, federal drug pricing legislation and an activist Federal Trade Commission all could play a major role in the performance of the pharma industry’s top ranks through the rest of this year. 

But second quarter reports, which begin this week, are likely to also bring questions on a potential $40 billion acquisition by Merck & Co., GSK’s new slimmed-down structure, Biogen’s leadership and important drug launches from Eli Lilly and Bristol Myers Squibb. Here are five storylines to watch: 

A $40 billion cancer drug deal? 

Pharma dealmaking has picked up as the value of many biotechnology companies remains depressed following a monthslong market downturn. Since April, there have been four buyouts worth greater than $1 billion, including Pfizer’s $11.6 billion acquisition of Biohaven Pharmaceuticals. 

An even bigger deal could be on the horizon. A series of reports from The Wall Street Journal indicate Merck is in negotiations to buy cancer drugmaker Seagen for about $40 billion — possibly rivaling Merck’s 2009 takeover of Schering-Plough in size. 

The companies are already partners on two of Seagen’s cancer drugs and collaborate on research involving Merck’s top-selling immunotherapy Keytruda. An acquisition could help Merck cushion the expected fall in revenue when Keytruda loses patent protection later this decade and expand its pipeline of antibody-drug conjugates, a treatment type Seagen pioneered and that’s recently shown significant promise across several kinds of cancers. 

Yet while deal discussions remain ongoing, an agreement isn’t likely to be finalized by when the companies report earnings, according to the Journal’s latest reporting. Hanging over the would-be deal is a court decision on potential royalties from Daiichi Sankyo, as well as pending results from a key trial of Seagen’s bladder cancer drug Padcev. 

Both drugmakers are set to disclose second quarter results on July 28. 

GSK’s future following consumer spinout

GSK’s earnings on July 27 will follow quickly on the heels of the spinout of its consumer health unit Haleon, which was completed Monday as the biggest London Stock Exchange listing in a decade.

Freed from managing over-the-counter brands like Advil and Polident, the British-based drugmaker can better focus on prescription drug development, executives have argued. Investors will likely be looking for signs the new-look GSK can achieve the 33 billion pounds, or $40 billion, sales target for 2031 that CEO Emma Walmsley laid out a year ago. The plan also called for cuts to shareholders’ dividends.

Soon after, activist investors went public with a call for a board and executive team shakeup claiming GSK’s growth had lagged its competitors in part because of a bureaucratic research and development division. 

In the past, GSK’s R&D has been strong in respiratory and infectious diseases, rather than the currently high-growth areas of cancer and autoimmune disease. 

However, some big opportunities await GSK, particularly in the race to launch the first preventive shot for respiratory syncytial virus. The company recently became the first to deliver positive Phase 3 trial data. 

GSK is also seeking to expand use of its cancer drugs Blenrep and Jemperli, and will report late-stage data later this year from two pipeline candidates, one in rheumatoid arthritis and the other a new antibiotic.

Searching for answers at Biogen

Michel Vounatsos’ time as Biogen’s CEO is drawing to a close. In May, the company revealed that Vounatsos, Biogen’s chief since 2017, would step down once a successor had been found. His departure was announced alongside plans to scrap marketing for Biogen’s controversial Alzheimer’s drug Aduhelm, which has earned only minimal sales since its approval last summer. 

The unsuccessful launch of Aduhelm — the first medicine cleared by the Food and Drug Administration to treat Alzheimer’s underlying cause — has greatly damaged Biogen and likely played a significant role in Vounatsos’ forthcoming exit. Both will likely be the focus of analyst questions at the company’s next earnings call, set for July 20. 

“The search for a new head remains ongoing, so we expect a progress update in the upcoming earnings release,” wrote Brian Skorney, an analyst at Baird in a recent note to clients. He added that he expects questions on the search, as well as on another experimental Alzheimer’s drug called lecanemab, “to go largely unanswered.” 

Lecanemab, which Biogen is developing together with partner Eisai, is the company’s next hope and vital clinical trial data are expected later this year. 

Early signs for Lilly’s new diabetes drug

In May, Lilly in May launched the first novel diabetes drug in years. Called Mounjaro, it will compete with three similarly acting Novo Nordisk products. While it may be too early for firm sales numbers, investors will likely still want to know about insurance coverage and uptake of free samples.

Moreover, the company’s Aug. 4 earnings call might also be an opportunity for Lilly executives to outline their plans to ask for FDA approval of Mounjaro as an obesity drug. The Indiana-based drugmaker reported strong weight-reduction data in April, which could accelerate an approval filing. Previously, the company had said it wanted results from additional trials before submitting an application.

Lilly’s plans for an experimental Alzheimer’s disease drug, meanwhile, have been slowed Initially. The experimental treatment donanemab was fast-tracked for submission following the FDA’s controversial Aduhelm approval, but the company pulled back once government and private payers largely refused to cover Biogen’s drug.

However, the FDA’s recent agreement to speedily review Biogen and Eisai’s lecanemab could influence Lilly executives once again.

A slow launch for a new Bristol Myers heart drug

Nearly two years ago, Bristol Myers spent $13 billion to buy biotech company MyoKardia and its drug mavacamten, which in April won Food and Drug Administration approval for an inherited heart condition called obstructive hypertrophic cardiomyopathy. 

Called Camzyos, the drug is important for Bristol Myers, which faces the looming patent expiration in the U.S. for its blockbuster blood thinner Eliquis, among other top products. The company has forecast annual Camzyos sales reaching at least $4 billion by 2029. 

But early prescription data suggest a slow launch, according to Salim Syed, an analyst at Mizuho Securities. In a recent note to clients, Syed noted that prescriptions under commercial insurance have not grown, even more than a month since Camzyos became available. The analyst suggested that restrictions imposed by the FDA over the drug’s heart risks could be slowing uptake. 

Bristol Myers executives could face questions on the rollout during their earnings call, scheduled for July 27. Other experimental drugs expected to become top-sellers, such as an immune medicine called deucravacitinib, might also be a focus of investors and analysts. 

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