Johnson & Johnson’s partnership on Intra-Cellular could lead to more major mergers in 2025
Johnson & Johnson has recently struck a massive deal with neuroscience specialist Intra-Cellular Therapies for nearly $15 billion. This move is seen as a reflection of the growing trend among large companies to engage in billion-dollar acquisitions to offset declining revenues from blockbuster drugs approaching patent expiration. Market analysts predict that more such significant deals may follow suit this year, given the expectation of a more lenient regulatory environment for mergers and acquisitions under the new US administration.
The acquisition of Intra-Cellular Therapies will allow Johnson & Johnson to incorporate treatments for central nervous system disorders into its portfolio. Among these, Caplyta, a treatment for depression, is touted as the most valuable, with potential peak annual sales exceeding $5 billion. As Jared Holz, a healthcare equity strategist at Mizuho, pointed out, this deal aligns well with J&J’s strategic goals, especially in light of the upcoming patent cliff for its blockbuster autoimmune antibody, Stelara. The expiration of Stelara’s patents in 2023 could pave the way for biosimilar competition in 2025, necessitating a proactive approach to revenue diversification.
Other pharmaceutical giants like Merck, Bristol Myers Squibb, Novartis, AstraZeneca, and Amgen are also bracing for significant patent losses in the next five years. Key drugs like Merck & Co’s Keytruda, Pfizer and Bristol Myers Squibb’s Eliquis, and Pfizer’s Prevnar pneumococcal vaccine face patent expiration challenges within the specified timeframe. In response to this impending revenue gap, big pharma companies are turning to mergers and acquisitions as a strategic means to drive sustained growth and secure new revenue streams in a highly competitive market.
The healthcare investment bank Leerink’s analysis corroborates the industry’s heightened interest in mergers and acquisitions focused primarily on oncology, immunology, and neurology from 2022 to 2024. Jeffrey Jonas, an analyst at Gabelli, highlighted the preference for deals involving small- to medium-sized biotechs, particularly in the $1-5 billion range, due to their potential for driving future growth amid patent expirations. However, the success of these acquisitions depends on navigating the inherent risks associated with drug development and market uncertainty.
Despite the overall optimism surrounding the pharmaceutical industry’s outlook for mergers and acquisitions, challenges remain, particularly in navigating regulatory hurdles and competitive landscapes. Companies like Takeda, Gilead, Sanofi, Novo Nordisk, and Eli Lilly are expected to fare better in terms of sales losses from patent expiries, yet they remain active players in the M&A landscape. Lilly’s recent acquisition of Scorpion Therapeutics and GSK’s purchase of IDRx underscore the industry’s dynamic and strategic approach to securing future growth avenues.
In conclusion, the pharmaceutical industry’s renewed focus on billion-dollar deals and mergers and acquisitions underscores the sector’s commitment to innovation, growth, and sustainability amidst evolving market dynamics and regulatory environments. As companies like Johnson & Johnson set the stage for transformative acquisitions, the industry is poised for a new wave of strategic partnerships and investments to shape the future of healthcare delivery and therapeutics.
