Drug pricing
Does this really even matter?
Despite all the sound and fury around drug-pricing negotiations, a look at the actual numbers suggests the IRA will signify very little for pharma's bottom line.
Ahead of this morning's announcement, analysts at Leerink looked at 40 drugs that could be subject to Medicare negotiation and assumed the resulting price cuts would be around 40%. Even then, the effects on pharmaceutical profits would be "immaterial" for most companies, the analysts wrote, largely because by the time negotiations kick in, most medicines are at the end of their patent lives, meaning they'd soon be facing generic competition anyway.
Chart of the day
Wall Street thinks Amgen can pull this off
The FTC's decision to pause its efforts to block Amgen's acquisition of Horizon Therapeutics doesn't guarantee the deal will go through, but the market seems to think the merger is all but cemented.
Shares of Horizon rose about 6% yesterday, peaking at about $113. That marks the smallest observed spread between Horizon's share price and Amgen's $116.50-per-share offer, dating back to December when the deal first materialized. That means traders are as confident it will go through as they were before the FTC challenged it in May.
Horizon's recent trading has doubled as a barometer for just how wary investors are of a newly active FTC. The agency's big objection to the merger rested on the potential for Amgen to "bundle" its medications — that is, offer a discount to payers if they covered a multitude of its drugs — in order to block competition to Horizon's best-selling medicines. The fact that the FTC's challenge appears to be fizzling should be heartening to investors betting on pharmaceutical buyouts.
M&A
Pharma's suppliers are dwindling
The many companies that supply drugmakers with products and services are feeling the effects of the industry's protracted downturn, and the resulting consolidation is making for fewer and fewer competitors in the field.
The latest example is Danaher, a life sciences supplier that has cut its revenue outlook three times this year, which agreed to pay $5.7 billion for the reagents company Abcam. For Danaher, the deal is "an attractive bolt-on" that should bolster flagging sales, TD Cowen analyst Dan Brennan wrote in a note to clients. But for biopharma companies, it presents yet another instance in which one supplier gets snapped up by another.
Over the past decade, contract manufacturers, clinical research organizations, and data firms have routinely been bought, smashed together, and relaunched as conglomerates. The process has often been lucrative for private equity firms and certain shareholders, but the end result is a less competitive market for the services drug companies require.
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