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Barry Cohen
Barry Cohen
Articles (195) 

Pharma Companies Look to Blockbusters to Drive Sales

Merck's Keytruda expected to become top-selling medication by 2026

In a previous article published in GuruFocus, I looked at the top five pharma companies on EvaluatePharma’s list ranked by sales the firms are expected to achieve in 2026. In this piece, we'll go over the next five companies on the list.

Merck & Co. Inc. (MRK)

  • Estimated 2026 sales: $51.96 billion
  • 2019 sales: $46.2 billion
  • 2019-26 CAGR: 3.48%

The cancer drug Keytruda will bear the heaviest responsibility as Merck moves toward projected sales of nearly $52 billion in 2026. By that time, Keytruda is expected to supplant Humira as the best-selling drug in the world with revenue of more than $24 billion, according to EvaluatePharma. Sales of the blockbuster are set to top more than $14 billion this year.

Merck should be applauded for expanding Keytruda’s indications to 17 since it was approved by the Food and Drug Administration to treat melanoma in 2014. Still, company CEO Ken Frazier recognizes Merck needs some big sellers behind Keytruda and is set on diversifying the company’s business and filling the pipeline. To allow Merck to increase its focus on new medications, the company announced in the fourth quarter it would spin off its women’s health and biosimilars businesses. The future of Merck’s cancer drug business looks promising with more than 20 candidates being studied.

Merck is also in the Covid-19 race, partnering with privately held Ridgeback Bio to develop an antiviral against the disease. The company is also working on a vaccine that applies the same technology used to develop its Ebola vaccine. That effort is supported by $38 million from the U.S. government’s BARDA and is one of the five vaccine candidates selected by the government’s Operation Warp Speed, reported FierceBiotech.

At $79.44, Merck is trading at about the mid-point of its 52-week range as of the writing of this article.

Sanofi (SNY)

  • Estimated 2026 sales: $49.50 billion
  • 2019 sales: $40.17 billion
  • 2019-26 CAGR: 3.03%

CEO Paul Hudson has a straightforward strategy to help Sanofi become nearly a $50 billion company by 2026. He wants to do more of what the company does well and less of what it doesn’t.

This means Sanofi will put greater R&D resources behind programs in cancer, rare diseases, vaccines and others with high growth potential. Falling by the wayside will be efforts in diabetes and cardiovascular.

The immunology treatment Dupixent will play a key role in the company’s makeover. To achieve sales of more than $11 billion in coming years, Sanofi plans to launch the product in new markets and secure expanded indications.

Sanofi achieved a milestone in cancer when its drug Sarclisa became its first wholly owned medication to receive FDA approval in ten years. On the vaccine front, the company is betting big, pumping more than $550 million into a new production facility in France.

Hudson wants the company’s drugs to be either the first to market or the best. At Sanofi’s recent R&D day, he talked about five promising treatments the company expects to submit for approval between next year and 2023.

Sanofi shares are trading at $53.27, just pennies away from its one-year high as of the writing of this article.

GlaxoSmithKline (GSK)

  • Estimated 2026 sales: $47.5 billion
  • 2019 sales: $37.07 billion
  • 2019-26 CAGR: 3.6%

GlaxoSmithKline is projected to be one of the fastest growers on the top 15 list, with revenues advancing at a compound rate of 3.6% to $47.5 billion by 2026. Despite flat overall pharmaceutical sales in 2019, the company's shingles vaccine Shingrix pulled in more than $2.3 billion.

Demand for Shingrix is still rising and Glaxo is looking to have a new manufacturing site online by 2024 to complement its facility in Belgium. That will allow the company to make doses in the tens of millions.

Glaxo has begun a two-year program to spin out its consumer health business into its own company. This will clear the decks for it to concentrate on building a streamlined firm focused on R&D.

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Sales of Glaxo respiratory products were up nearly 40% in the first quarter. The company is optimistic about the prospects for its HIV drug cabotegravir, which could reach sales of some $945 million in coming years. In oncology, Glaxo’s treatment for ovarian cancer got FDA approval as first-line maintenance therapy. The company has high hopes for the cancer drug belantamab mafodotin, which is under agency review.

Glaxo’s stock is trading at about $42 as of the writing of this article; its 52-week high is $48.25.

Bristol-Myers Squibb Co. (BMY)

  • Estimated 2026 sales: $43.8 billion
  • 2019 sales: $25.17 billion
  • 2019-26 CAGR: 8.23%

Bristol-Myers is expected to grow at a blistering pace of 8.23% compounded during the next six years, riding the success of cancer drug Opdivo and blood thinner Eliquis, supplemented by last year’s acquisition of Celgene. The latter added $17 billion to Bristol’s top line.

Opdivo is performing even better than expected and is on pace to become the third best-selling drug in the world by 2026, raking in more than $12 billion. That would be a 46% gain from 2019, but it will still be only about half of what the Merck's competitor Keytruda is expected to hit.

Any shortfall in Opdivo sales due to Keytruda should be more than made up by Elquis, sales of which EvaluatePharma expects to reach nearly $12.5 billion by 2026.

On the horizon are two cancer drugs Bristol got in the Celgene deal, both of which the company hopes to get green-lighted by the FDA by the end of the year. Significant contributions to revenue are also expected from a Celgene drug for anemia and another for multiple sclerosis.

More deals may be in the future, as Bristol last March hired Elizabeth Mily as VP of strategy and business development. The former Barclay’s executive has engineered $200 billion in mergers and acquisitions.

AstraZeneca (AZN)

  • Estimated 2026 sales: $41 billion
  • 2019 sales: $23.2 billion
  • 2019-26 CAGR: 8.47%

With sales projected to grow at a compound rate of nearly 8.5%, AstraZeneca will be looking in the rear-view mirror at all the other pharmas listed on the top 15. The company’s sales are projected to grow from $23.2 billion to $41 billion by 2026.

What’s to account for the revenue boom? Most of it can be attributed to AstraZeneca’s powerful lineup of cancer drugs. In the first quarter, demand for the company’s biggest seller, Tagrisso for lung cancer, broght in $982 million. Two other cancer medications both beat analysts’ estimates, selling a combined $857 million.

Tagrisso can do a lot better if it gets the expanded indication it's shooting for. That would add about 60,000 patients worldwide, which is 25% of the drug’s current pool.

FierceBiotech reported that SVB Leerink analyst Andrew Berens wrote to a note to clients that this additional use could propel peak worldwide sales for Tagrisso to about $16 billion.

Astra may have another blockbuster with the heart drug Farxiga. Earlier this year the FDA approved the drug to reduce the risk of cardiovascular death in a type of heart failure patients. The approval expanded Farxiga’s potential patient population to six million in the U.S.

AstraZeneca is trading at $58, just short of its one-year high as of the writing of this article.

Disclosure: The author has a position in Bristol-Myers Squibb.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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