Pharmaceutical giant Bristol-Myers Squibb (NYSE: BMY) is facing a steep patent cliff as the company’s three top-selling drugs lose patent exclusivity in the coming years. The company needs to almost completely turn over its product portfolio by 2028, so the focus falls squarely on the performance of its newest medicines. Fortunately, Bristol-Myers has just launched several highly anticipated drugs.
Pressure from generics
Blood cancer drug Revlimid has been Bristol-Myers’ top-selling drug, bringing in $12.8 billion in sales in 2021. But Revlimid will be facing mounting competition in the next several years. Bristol-Myers granted several companies volume-limited licenses to sell generics within the U.S. starting in March. The volume of generics will increase until 2026, at which point the market will become completely open to competition. Major European markets also opened to generics early this year, and the Japanese market is opening up too.
Revlimid sales will steadily decline through 2026, with the company estimating sales of $9 to $9.5 billion in 2022. This leaves an immediate gap of about $3.5 billion that must be filled through other drug sales.
In the short term, Bristol-Myers’ second top-selling drug, Eliquis, and third top- selling drug, Opdivo, are showing strong growth and should make up much of the difference. Between the two of them they could add $2.4 billion in sales, if they continue to grow at rates similar to 2021. Other fast-growing drugs, like Pomalyst, Yervoy, and Reblozyl, should add enough new sales to easily cover the rest of the gap and contribute some extra on top.
But patent expirations for Eliquis, Opdivo, Pomalyst, and Yervoy are not far behind Revlimid. Opdivo’s patent will expire in 2028, while the rest will lose protection by 2026. In other words, Bristol-Myers may need to replace six out of seven of its current top-selling drugs, or 83% of total 2021 revenue, to sustain sales.
Next round of launches
So far, the late-stage pipeline acquired through the purchase of Celgene has served Bristol-Myers well. This pipeline included immunology treatment Zeposia and blood cancer treatments Abecma and Breyanzi. All three drug candidates have been approved by the Food & Drug Administration (FDA) and are taking off in the market. Most recently launched Abecma is just wrapping up its first full year on the market with a respectable $231 million of sales.
Offering even greater earning potential, Bristol-Myers may launch three first-in-class medicines this year, and estimates indicate that each could individually earn $4 billion in sales by 2029. Skin cancer drug Opdualag launched in March and cardiovascular drug Camzyos launched in April. Immunology drug deucravacitinib is due for a critical decision by the Food & Drug Administration (FDA) for psoriasis on September 10. The company also hopes to expand indications for all three of these medicines to treat other diseases in the future.
The combined $12 billion from these newest therapies will easily cover Revlimid’s portion of sales, but more will be needed to replace declines as the other drugs lose their exclusivity in the upcoming years.
Slower growth ahead
Bristol-Myers’ revenue has been growing at the fast clip of 19% annually over the past three years, above most of its pharmaceutical peers. But this pace looks unsustainable as key blockbusters lose their patent protection. Second quarter revenue grew 2% year-over-year, and management expects numbers in the low- to mid-single digits for the next five years as the new product portfolio and extensive late-stage pipeline come into their own.
At the moment, Bristol-Myers’ price-to-earnings ratio (P/E) of 26 looks relatively high compared to many other large pharma companies, such as Merck‘s P/E of 16 or Pfizer‘s P/E of 12. Second quarter earnings show marketplace growth for the newest medicines, but it may be worth keeping your eye on their performance, as well as any deals the company makes to bolster its late-stage pipeline, to satisfy yourself about the company’s longer-term growth prospects before moving on this stock.
Natalie Forbes has positions in Bristol Myers Squibb and Merck & Co. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool recommends Merck & Co. The Motley Fool has a disclosure policy.