Experts Question Recent Pharma Acquisitions

The purchase of Celgene by Bristol-Myers Squibb (BMS) and Eli Lilly's acquisition of Loxo Oncology may not boost drug development but will likely lead to higher prices, experts say. That means patients and shareholders might not gain much from the acquisitions.

The two deals, announced in quick succession in early January, involve companies that make some widely used cancer treatments and some innovative new compounds. BMS, which manufactures the checkpoint inhibitors nivolumab (Opdivo) and ipilimumab (Yervoy), is paying $74 billion for Celgene, whose biggest seller for cancer is lenalidomide (Revlimid), a thalidomide derivative. Eli Lilly, producer of, among others, the EGFR antagonist cetuximab (Erbitux), will pay about $8 billion for Loxo Oncology. The FDA recently approved Loxo's larotrectinib (Vitrakvi) for patients with any cancer showing NTRK fusions, making it the second tumor-agnostic drug on the market. Loxo's pipeline also includes LOXO-292, another tumor-agnostic compound that targets RET mutations and fusions.

The acquisitions come on the heels of GlaxoSmithKline's purchase of Tesaro, announced in December.

Kevin Schulman, MD, of Stanford University School of Medicine in California, says these deals are part of a continued pattern of acquisitions, but the timing isn't necessarily significant because purchases are usually a matter of opportunity. “All large companies are constantly looking for acquisitions to fill gaps in their pipelines,” he notes.

The two most recent acquisitions, however, are unlikely to pay off as business deals, asserts Bernard Munos, MBA, a biomedical consultant with the Milken Institute who is based in Indianapolis, IN. (Munos previously worked for Eli Lilly but retired from the company in 2010.) Shareholders have often suffered losses after similar mergers, he says. Moreover, Loxo may not be the prize it appears to be, he adds, because Bayer shares the rights to larotrectinib and another compound in the Loxo pipeline, LOXO-195. “I am frankly not very optimistic that the shareholders of BMS or Lilly will see much benefit from the acquisitions.”

Whether the deals will speed drug development or spark innovation is another issue. In principle, combining companies can increase the efficiency of R&D, says Anupam Jena, MD, PhD, of Harvard Medical School in Boston, MA. Still, some researchers have argued that mergers and acquisitions impede drug development because the united companies face less competition and have less motivation to create new products.

To evaluate that idea, in 2017, Schulman and colleagues analyzed the effects of pharmaceutical mergers and acquisitions between 1985 and 2009 (see http://scholarship.law.duke.edu/faculty_scholarship/3749/). The researchers found that companies that took part in more mergers and acquisitions did tend to spend less on R&D. However, those companies were also more likely to get their drugs into clinical trials.

Schulman thinks that “the mergers will potentially decrease internal R&D at the acquiring firms but might spur more investment in early-stage biotechnology companies that will hope to be similarly acquired.”

Another consideration for R&D, Munos says, is how the acquisitions will affect innovation. “The jury is still out” on whether Loxo can continue to innovate as a part of Lilly, he says. BMS and Celgene, on the other hand, have had mixed records with their return on R&D in recent years, Munos says, and he predicts that they won't do any better together.

He and Schulman agree that the acquisitions will probably lead to increases in drug prices. “That $8 billion [for Loxo] has to come from somewhere,” Schulman says.

Jena says that the effect on prices is harder to predict and will depend on how much competition the combined companies encounter that might eventually curtail cost increases. “There may be an impact on prices in the short term—although the size of that impact is unknown,” he says. –Mitch Leslie

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