A series of mega-blockbuster drugs are on the horizon. How to invest in the trend

Published Sat, Oct 8 20228:12 AM EDT

Christina Cheddar Berk @in/christina-cheddar-berk-b864404/

Biopharma companies are having more clinical success treating Alzheimer's disease and obesity and are taking new approaches in oncology, and that's creating more mega-blockbuster drugs, according to Bank of America. Analyst Geoff Meacham has identified 20 drugs that have the potential to generate $10 billion or more in annual sales by 2030 within the universe of companies he covers. "Based on our analysis, most mega-blockbusters share some common attributes including: 1) large addressable populations, 2) long duration of therapy, and 3) favorable pricing," said Meacham in a research note Friday. "That said, the biggest drugs usually feature one, or best case two, of these attributes." For example, a drug like Covid-19 vaccines Comirnaty (Pfizer/ BioNTech ) or Spikevax ( Moderna ), can hit mega-blockbuster status with a low price but a huge market of patients. A drug can also wind up in this group if it treats fewer patients at a higher cost such as Merck's Keytruda cancer treatment. Seven drugs on Meacham's list are already in the market, and have already hit the $10 billion or more benchmark. These include Pfizer's Covid-19 treatment Paxlovid, AbbVie's arthritis treatment Humira and Gilead's HIV/AIDS treatment Biktarvy. That means some of these drugs may be already hitting the end of their peak sales period. Meacham puts Humira and the Covid vaccines in this category. That leaves 13 drugs that have yet to hit the mark. A portion of the names on this list are still in early stage development, and therefore carry some risks such as the potential for the drug to not clear regulatory hurdles, meet the goals of clinical trials or to get push back from health insurance companies on pricing and coverage. Meacham has previously said that one of the drugs in this bucket, Eli Lilly's tirzepatide, could be the first $100 billion drug . It is already approved as a treatment for type 2 diabetes, and sales are off to a strong start. But many investors are hopeful about its potential as an obesity treatment . On Thursday, tirzepatide received word from the Food and Drug Administration that the agency would fast track the review of the application for this use . That means tirzepatide could win approval to treat obesity as soon as late 2023 or early 2024. However, Meacham's eye-popping sales forecast is based on an expectation that the drug will also be used to treat other conditions such as NASH, sleep apnea, kidney disease and heart failure. "From our analysis, we think that Lilly's tirzepatide uniquely could capture all 3 market drivers and in dramatic fashion given the significant development investment made across many indications. In our view, this is very much underappreciated by investors given the acute focus on just T2D and obesity," he said. Lilly's stock is up 18% year to date. On Sept. 28, it hit an all-time high of $341.70. In cancer treatment, Keytruda and Bristol Myers' Opdivo have already achieved blockbuster status but biopharma companies are looking at combination immuno-oncology therapies. One example Meacham cited is Opdualag, which has been approved to treat metastatic melanoma. Bristol is studying its potential as a treatment for liver and lung cancer, which if successful could accelerate Opdualag's sales growth considerably, he said. Bristol shares have gained nearly 12% year to date, while Merck's stock is up 14% over the same period. Finding effective treatments for Alzheimer's has proven to be a challenge in the past, but investors have been encouraged by the recent results from a large, late-stage clinical trial for lecanemab, a treatment from Biogen and Eisai. This new medication appears to help patients more than Biogen's earlier treatment, Aduhelm. That drug won FDA approval but then struggled after Medicare limited coverage of the treatment. But the new medication appears to be more successful in slowing a patient's cognitive decline. Hopes for the drug have catapulted Biogen shares . The stock is up more than 42% year to date. Lilly also has an Alzheimer's treatment , donanemab. Updates from its phase 3 trial are expected by mid-2023. Meacham said he expects that multiple Alzheimer's treatments can co-exist due to the large patient population. "We expect meaningful growth for lecanemab if it can obtain broad coverage from [the Centers for Medicare & Medicaid Services], and could become Biogen's best-selling product and offset revenue erosion in other products," he said.