The launch of a top-selling drug has historically been enough to satisfy the shareholders of big pharmaceutical companies. In 2017, it seems that will no longer do. Merck (US: MRK) and Shire (SHP) have both recently launched blockbuster drugs – generating over $1bn of sales in one year – in the US, but suffered heavy share price declines after reporting lower than expected revenue in their respective third quarters.
Merck’s blockbuster is Keytruda, which earlier this year became the first treatment ever to be approved by the Food and Drug Administration for all types of cancer, regardless of its location in the body. It has also been approved as the first choice of drug to treat non-small-cell lung cancer, an illness that gains 222,500 new cases each year in the US alone, according to the American Cancer Society. Its efficacy sent sales up nearly 200 per cent to $1.05bn in the third quarter – the first time it has surpassed the quarterly $1bn mark.
Shire’s newest drugs are also striding forwards. Dry eye treatment Xiidra contributed $77m of sales in the third quarter – $9m ahead of consensus estimates – and attention deficit hyperactivity disorder (ADHD) medicine Mydayis achieved $10m of revenue in its first month. Eight of Shire’s top-selling drugs generated double-digit revenue growth in the third quarter.
But both Merck and Shire have felt the pressure of a clampdown in drugs pricing. The former reported a 4 per cent drop in like-for-like human healthcare sales in the third quarter, while the latter’s 7 per cent increase was below broker expectations.
For Merck, the problem is diabetes drug Januvia, which contributed 10 per cent of total revenue in the third quarter. Pharmaceutical companies in the US are being forced to lower the prices of commonly used medicines, and a cut to the cost of Januvia sent sales down 1 per cent year on year. Shire had previously been immune to drugs pricing concerns, but an increase in competition in the speciality pharma market – its area of focus – could send prices down, according to brokers at Shore Capital. This is concerning as a price hike in 2016 was the only reason Shire’s top-selling drug, Vyvanse, reported an increase in revenue in the third quarter.
