Citi On The Impact Of Biosimilars And Losing $360 Billion In Revenues

Citi analyst Andrew Baum released research notes on several pharmaceutical companies Monday. Baum’s overarching theme was about the impact from biosimilars.

Baum believed "that the market materially underestimates the magnitude and the timing of the impact on exposed innovator companies as well as the commercial opportunity for the biosimilar sponsors.”

Citi's analysts estimated that “despite the multiple defensive tactics, innovators will likely lose an aggregate >$360 billion in revenues over the next ten years, with c.$110 billion captured by biosimilar sponsors and the residual helping to alleviate the high and growing cost pressures for both patients and payors associated with introduction of premium-priced speciality drugs, most notably immunotherapy.”

The analyst note indicated that biosimilars would create approximately 50 percent savings for western healthcare budgets by 2015. The need for savings was noted, in particular, for the United States due to its outlier position on healthcare spending.

Source: Citi Research, The Atlantic.

Looking to specific companies, Dermira Inc DERM was downgraded from Buy to Neutral and its price target was cut from $23 to $20 as the company faces price erosion from pharmacy benefit plans with the introduction of biosimilars.

The analysts anticipated a 70 percent loss in market share for Dermira “in the first 7 years following biosimilar launches in 2018, and that branded pricing in the class will decline by 35 percent in order to compete with the introduction of biosimilars.”

Baum also thought that the impact of the biosimilar opportunity was not priced into shares of Actavis plc ACT. The company was rated Buy with a $325 price target. Baum viewed “ACT/AMGN as a top 3 biosimilar collaboration that is well positioned to capture this revenue opportunity.”

The analysts were “encouraged by recent positive pipeline and business development” at Pfizer Inc. PFE. The company was rated Buy with a $37 price target. Baum anticipated “positive data for three high potential cancer trials anti-CD137 (NHL), anti- PDL1 (ovarian cancer) and ‘309 (pancreatic cancer).”