Brexit Analysis - Top 10 U.K. Drugs

|
Includes: ABBV, BAYRY, BMY, REGN
by: EP Vantage

In Friday’s post-Brexit scramble many biopharma companies downplayed the importance of the UK, despite being one of Europe's five biggest markets. According to forecasts made before the EU referendum was held, the UK – or more accurately England and Wales, the only areas for which data are available – will be worth €27bn in 2022, making up 13% of the EU market.

EvaluatePharma’s European drug forecasts module shows that Bayer (OTCPK:BAYRY)/Regeneron’s (NASDAQ:REGN) Eylea will be the best seller in the UK in 2022, taking over from AbbVie’s (NYSE:ABBV) Humira, which was the top drug in 2015 (see tables below). Regeneron has said that the UK’s withdrawal from the EU would have little impact on its revenues, while AbbVie believes that the country accounts for only around 3% of its total sales.

Brexit seems unlikely to make a mark on most big pharma companies, but the smaller players could be hit if investment becomes harder to come by. It could also have a knock-on effect on innovation if UK universities, one source of new biotech groups, lose out on EU grants.

European drug sales by country

Sales (€bn)

Country

2015

2022

Germany

32.3

42.1

France

24.3

27.3

Italy

22.8

27.2

UK (England and Wales only)

20.1

27.1

Spain

14.7

16.8

EU total

168.8

206.0

Source: EvaluatePharma

It is somewhat surprising that Eylea is in the UK top spot: the wet age-related macular degeneration treatment is only forecast to be the 17th-biggest seller in the US in 2022, with revenues of $4.6bn.

It also does not fare so well in the other big European nations, being only number 10 in Germany and number five in France, and not even making Italy's top 10 in 2022.

This could be explained by the UK’s strict approach to drug pricing. Bayer has agreed a patient-access scheme with the UK’s Department of Health, but does not give details of the discount that is applied to Eylea.

Top-10 drugs in England and Wales by 2022 forecast sales

Sales (€m)

Product

Company

2015

2022

CAGR

Eylea

Bayer/Regeneron

259

422

+7%

Revlimid

Celgene

183

333

+9%

Opdivo

Bristol-Myers Squibb

17

261

+48%

Xtandi

Astellas Pharma

89

233

+15%

Humira

AbbVie

506

225

-11%

Xarelto

Bayer

109

219

+10%

Lucentis

Novartis

311

204

-6%

Seretide/Advair

GlaxoSmithKline

460

200

-11%

Perjeta

Roche

55

196

+20%

Soliris

Alexion Pharmaceuticals

89

184

+11%

Source: EvaluatePharma

The only recently approved drug in the UK table is Bristol-Myers Squibb’s (NYSE:BMY) checkpoint inhibitor Opdivo – which is perhaps indicative of the country’s stance over expensive new drugs. Opdivo is forecast to be the top drug in France and Italy, and number three in Germany, in 2022.

One product that looms large in the US, but not so much in Europe, is AbbVie’s Humira. The discrepancy could be explained by the expected impact of biosimilars, which have been embraced by the more cost-conscious European nations – some more so than others.

Separate system?

While the impact of Brexit on marketed drugs is arguable, the picture looks less rosy for drugs that do not yet have approval – particularly if the worst-case scenario happens and the UK ends up with a separate regulatory system.

If this does come to pass “the reality is that the UK process would come second”, Mike Thompson, chief executive of the Association of the British Pharmaceutical Industry, told EP Vantage. “A rational decision from a pharma company would be to get registration in a market which will give 500 million patients access to the medicine versus 60 million patients.”

It is still unclear whether this will happen, as the details of Brexit are yet to be hammered out. The ABPI hopes not, and has highlighted the UK’s importance in the EU regulatory process (Sector licks its Brexit wounds, June 24, 2016).

Too much is still unknown to say what impact Brexit might have on the UK biopharma industry. For now, the likes of the ABPI are saying it is business as usual; whether the markets heed this message is another matter.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.