If you’re the CEO of one of the biggest pharma companies in the world, there’s likely a lot on your mind. With U.S. drug pricing negotiations on the table and volatility still roiling the biotech markets, molehills can become mountains in the blink of an eye.
As these companies report second-quarter earnings, CEOs have weighed in on matters of drug pricing policy, M&A prospects and pipeline headway, giving a clear picture of where their individual businesses stand and, put together, the overall state of the biopharma industry as it heads into the second half of the year.
Here, we’re exploring snapshots of these conversations from earnings calls over the last couple weeks, in the CEOs’ own words.
Ire for the IRA
“We remain very concerned about the government price-setting environment the IRA creates, which we believe creates a significant disincentive to innovation without addressing the core problem which is patient access. And that’s one of the reasons … we have filed a lawsuit versus the IRA.”
J&J has joined fellow pharma companies and the industry lobbying group PhRMA in suing the Biden administration over the Inflation Reduction Act’s provisions that would allow Medicare to negotiate drug prices, claiming it violates the First and Fifth Amendments of the U.S. Constitution. Despite CEO Joaquin Duato’s concerns, he said on the earnings call that J&J is better prepared than other industry players to deal with the potential IRA fallout due to the more diverse nature of its pharma and medtech businesses, allowing the company to continue on its path to $57 billion in pharma revenue by 2025.
“The reality is it’s unclear what the impact will be in the short term … it will be longer term as it relates to our important drugs, Keytruda and Gardasil. The reason we continue to oppose the overall legislation is a strong belief that the focus on mandatory discounts after a period of time (would) chill innovation.”
Rob Davis
CEO, Merck & Co.
Merck is another in the Big Pharma clan with a lawsuit against the IRA’s drug pricing provisions. For the company’s flagship cancer drug Keytruda, which is set to lose exclusivity in 2028, the negotiation period would not have as big an impact as it would on a drug much earlier in its lifecycle. Similarly, the HPV vaccine Gardasil, which is Merck’s second in line in terms of revenue, has been on the market since 2006 and would not be as heavily affected. However, as Merck searches for pipeline prospects to fill the revenue gaps left by those blockbusters down the road, the IRA could play a more important role.
“There are some really good things about the IRA that we’re very supportive of — the co-pay removal in vaccines is important for our portfolio — there are some other things … we’re concerned about in terms of unintended consequences.”
GSK CEO Emma Walmsley makes the point that the company’s vaccine portfolio could actually get a boost from the IRA by allowing more patients to receive shots at a lower cost. For example, GSK’s newly approved RSV vaccine Arexvy is likely to be launched at a slower rate than the company’s blockbuster shingles vaccines Shingrix, Walmsley said — disease awareness and competition could play a part, but the IRA’s removal of vaccine co-pays would help bring more patients in the door. Still, the overall effect on innovation is a concern, she said.
Deals in view
“When it comes to pharma, our history in tuck-ins, in-licensing and collaborations has been very successful. As a matter of fact, external innovation represents about 50% of our pipeline. While we continue to look for opportunities like we have done now with cellular biomedicine and the agreement that we have in CAR-T, we are not averse to other transactions of larger size, evidently, both in medtech and in pharma.”
J&J’s history of M&A is indeed prolific, and the company boasts a wide network of smaller companies that fuel its innovation engine. But the company has yet to make an acquisition this year, and its latest deal was a $16.6 billion purchase of heat pump maker Abiomed in the device space rather than pharma. The company has opted for partnerships and licensing instead, characterized by the long-standing collaboration with Legend Biotech that brought about exquisite data in multiple myeloma this year. From what Duato said on the call, there could be some bigger deals on the horizon for the many-armed juggernaut.
“I want to enforce — and we’ve said consistently — (that) we have the capital and the balance sheet strength to go after anything we feel is strategically important that brings that scientific innovation that I mentioned that will allow us to continue to augment what we have in our own internal pipeline.”
Rob Davis
CEO, Merck & Co.
In a year that has seen a resurgence of multibillion-dollar deals in pharma, Merck played its part with the $10.8 billion purchase of immune-focused Prometheus Biosciences, and CEO Rob Davis said on the call that the company’s cash position could give them the flexibility to make more of those moves. But, as is usually the case, he wouldn’t get specific about what those deals would look like and where the innovation would settle in the pipeline.
“We have been very focused on multiple sclerosis over 45 years. We had some very prosperous times in the more recent history of the company, and as we have seen, a reversal of fortunes in some of those products. I don’t think we, as a company, have really made the changes in our organizational structure and our cost base to really reflect that transition.”
Christopher Viehbacher
CEO, Biogen
Biogen’s ups and downs are well-documented, particularly around the Alzheimer’s disease space, where approvals and failed launches have sent the company’s stock to the highest highs and lowest lows. But CEO Christopher Viehbacher said that the company is seeking to be “a lot more thoughtful” about how Biogen positions itself moving forward and developing the business with early-stage pipeline acquisitions. And while he said the company won’t walk away from the slow-moving neuro space, he mentioned the areas of rare disease and immunology as potential new directions.
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