General Industry Update
It was a busy month for mergers and acquisitions in the healthcare sector, as a number of pharma companies made moves aimed at powering new sales growth into 2024 as demand for COVID-related products wanes and older drugs begin losing patent protection and face competition from lower-priced generics in the next several years.
The biggest mover in December was Bristol Myers Squibb, who announced several deals. The first was to acquire Karuna Therapeutics for $14 billion in an all-cash deal, marking a strategic move to establish a strong position in neuroscience drugs.
At the center of this acquisition is Karuna’s flagship product, KarXT, an experimental drug for schizophrenia treatment currently awaiting FDA approval. The drug, based on molecular insights into central nervous system diseases, is also being developed for conditions associated with Alzheimer’s and bipolar disorder. Mizuho Securities analysts predict potential yearly sales exceeding $6 billion if approved for various uses. The deal is expected to close in H1 2024.¹
Just days later, Bristol Myers Squibb also sealed a $4.1 billion deal to acquire radiological drug developer RayzeBio Inc. This move is part of Bristol’s strategy to enhance its oncology pipeline. The San Diego-based RayzeBio specializes in radioactive drugs targeting various tumours in organs like the lung, pancreas, and liver. Bristol aims to bolster its portfolio with drugs that utilize tumour-killing radiation. The transaction is also slated to conclude in H1 2024.
The premium paid for RayzeBio underscores the active mergers and acquisitions market in cancer drugs. Bristol’s acquisition signals the pharmaceutical sector’s keen interest in radiopharmaceuticals, which offer precise medication delivery to tumours while minimizing damage to surrounding tissues.²
As further evidence of this trend, Pfizer Inc (held by the Fund) finalized its $43 billion acquisition of Seagen Inc. following approval from the Federal Trade Commission (FTC). To secure FTC approval, Pfizer committed to donating the U.S. royalties for the cancer drug Bavencio to the American Association for Cancer Research.
The acquisition expands Pfizer’s portfolio with a range of antibody-drug conjugates (ADCs), known for delivering potent doses that maximize tumor-killing impact while minimizing damage to surrounding tissues. ADCs have emerged as highly sought-after products in the pharmaceutical industry.
The integration of Pfizer and Seagen’s efforts will create a dedicated division focused on enhancing “focus, speed, and quality of execution in oncology.” This shift aligns with projections by analytics firm IQVIA, forecasting global spending on cancer treatments to reach $375 billion by 2027.³
And elsewhere in the industry, medical tools supplier Danaher announced the successful completion of its $5.7 billion acquisition of U.K.-based Abcam. The deal, agreed upon in September, aims to enhance Danaher’s product and service offerings. Abcam specializes in the manufacturing and supply of essential protein consumables, including antibodies and reagents crucial for medical research.⁴
Company Specific Updates
In December, Vertex Pharmaceuticals received U.S. Food and Drug Administration approval for the first cell-based gene therapy for treating sickle cell disease (SCD) in patients 12 years old and older. The treatment, Casgevy, uses CRISPR/Cas9 technology as part of a novel gene editing technique to alter a patient’s genome, marking a significant leap in gene therapy.5
Sickle cell disease affects around 100,000 Americans, predominantly African Americans and Hispanic Americans, due to an inherited blood disorder that mutates the shape of red blood cells, leading to severe pain and organ damage. Casgevy is a one-time therapy offering the potential of a functional cure for sickle cell disease.6 And because doctors use the patient’s own cells and DNA, there is no chance of rejection as with donor cells.⁷
Eli Lilly & Co
Eli Lilly & Co. launched its new weight-loss drug, Zepbound, at U.S. pharmacies in December, providing an alternative to consumers amid ongoing supply issues faced by rival drugs like Novo Nordisk’s Wegovy.
Priced at $1,059.87 for a month’s supply, Zepbound is more cost-effective than Wegovy (priced at $1,349). Lilly also emphasizes that individuals with insurance coverage will pay less. With a competitive price and superior weight-loss efficacy, analysts predict Zepbound’s adoption to surpass that of Wegovy, with potential sales reaching $26 billion by 2030. Eli Lilly is proactively expanding its global manufacturing capacity in anticipation of the expected demand for Zepbound, aiming to avoid the supply shortages experienced by both Wegovy and Lilly’s own Mounjaro shots.⁸
Billionaire investor Ken Langone has gone so far as to predict that Eli Lilly could become the first trillion-dollar drug company. Riding the success of GLP-1 drugs like Mounjaro and Zepbound, Eli Lilly’s shares have surged 62% since January, propelling it to be the largest pharmaceutical company by market cap, now valued at approximately $568 billion.⁹
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Portfolio Strategy and Activity
For the month, Vertex Pharmaceuticals made the largest contribution to the Fund, followed by Intuitive Surgical Inc and AbbVie Inc. The largest detractors to performance for the month were Pfizer Inc, followed by Eli Lilly & Co.
- Rockoff, J.D., “Bristol Myers to Buy Karuna Therapeutics for $14 Billion,” The Wall Street Journal, December 22, 2023; https://www.wsj.com/health/pharma/bristol-myers-to-buy-karuna-therapeutics-for-14-billion-6a6c1bce
- Muller, M., “Bristol Adds to Buying Spree With $4.1 Billion Drugmaker Deal,” Bloomberg, December 26, 2023; https://www.bloomberg.com/news/articles/2023-12-26/bristol-myers-adds-to-buying-spree-with-radiological-drugmaker
- Cattan, N. & Lauerman, J., “Pfizer to Close $43 Billion Seagen Acquisition After FTC Nod,” Bloomberg News, December 12, 2023; https://www.bnnbloomberg.ca/pfizer-to-close-43-billion-seagen-acquisition-after-ftc-nod-1.2010607
- “Danaher completes $5.7 billion acquisition of Abcam,” Reuters, December 6, 2023; https://www.reuters.com/business/healthcare-pharmaceuticals/danaher-completes-57-billion-acquisition-abcam-2023-12-06/
- “FDA Approves First Gene Therapies to Treat Patients with Sickle Cell Disease,” U.S. Food and Drug Administration, December 08, 2023; https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapies-treat-patients-sickle-cell-disease
- “Vertex and CRISPR Therapeutics Announce US FDA Approval of CASGEVY (exagamglogene autotemcel) for the Treatment of Sickle Cell Disease,” Vertex Pharmaceuticals, December 8, 2023; https://investors.vrtx.com/news-releases/news-release-details/vertex-and-crispr-therapeutics-announce-us-fda-approval
- Wong, C., “UK first to approve CRISPR treatment for diseases: what you need to know,” Nature, November 16, 2023; https://www.nature.com/articles/d41586-023-03590-6
- Muller, M., “Eli Lilly’s New Weight-Loss Drug Now on Sale to Rival Hard-to-Find Wegovy,” Bloomberg, December 5, 2023; https://www.bloomberg.com/news/articles/2023-12-05/zepbound-weight-loss-drug-now-on-sale-to-rival-hard-to-find-wegovy
- Soni, A., “Eli Lilly will be the first trillion-dollar drug company in history, billionaire investor Ken Langone says,” Markets Insider, December 13, 2023; https://markets.businessinsider.com/news/stocks/eli-lilly-stock-diabetes-ozempic-wegovy-weight-loss-drug-pharma-2023-12