New Pharma companies are shaking up industry

Multi-billion dollar Big Pharma companies are facing competition from newer, tech-savvy drugmakers like Vertex Pharmaceuticals, Amgen, Regeneron and Genmab, which have added $270 billion to their market values over the past five years.

Meanwhile, the combined values of large, established players like Pfizer ($159 billion), Novartis ($230 billion) and Roche ($216 billion) have dropped by nearly $80 billion.

The rapid growth of these new-age pharmaceutical companies is making the market more competitive and driving up the price of potential acquisitions, Reuters reported recently.

The value of biopharma M&A increased by 79% last year to $152 billion. 

Amgen, now as large as Pfizer, spent $28 billion on Horizon Therapeutics. Roche bought Genentech for $47 billion in 2009, and Pfizer acquired a cancer specialist for $43 billion in 2023.

The increased competition comes as Big Pharma faces other challenges, like losing patent protection on major drugs. For instance, Merck’s cancer drug Keytruda, which made over $25 billion in 2023, will lose its patent in four years.

Meanwhile, new laws, like President Joe Biden’s Inflation Reduction Act, give longer patents to biologic drugs—created using living cells and were historically made by smaller technology-driven drugmakers. That further bumps up the value of the companies that make those newer products.

Deals and acquisitions seem to be a better way for traditional drugmakers to stay on top. However, higher competition will increase the price for smaller companies, and this is already happening. AbbVie paid a 95% premium when it purchased ImmunoGen for $10 billion earlier this year.