3 Big Pharma Frenemies to Watch in 2013
Jan 8th 2013 1:38PM
Updated May 10th 2013 1:05PM
Trivia time: Which rock group sang the 1975 hit "Why Can't We Be Friends?" Ironically, the name of the group was War. That old song -- and the name of the group that sang it -- seem appropriate for big pharma these days. Despite battling ferociously, more and more of the major pharmaceutical firms are working together on friendly terms to develop and market new products.
Some of these "frenemies" should be especially interesting to watch over the coming year. Here are three that investors might want to keep their eyes on.
Twins joined at the hip?
AbbVie and Bristol-Myers Squibb aren't identical big pharma twins, but they look quite similar in several ways. Both made between $18 billion and $19 billion in revenue over the past 12 months. Each has a market cap around $55 billion. The stocks of the two companies trade less than $1 apart, between $33 and $35 per share. Speculation has focused on AbbVie and Bristol as potential acquisition targets, particularly for Roche.
There even a few similarities in the two companies' product portfolios and pipelines, although there are admittedly many more differences. For example, AbbVie and Bristol both have breast cancer and hepatitis C drugs in development or on the market.
Several of these commonalities would tend to result in AbbVie and Bristol being natural rivals. And they are. However, they also are partners. The two companies are working together currently in development of elotuzumab, an experimental drug for treatment of multiple myeloma.
The coming year could bring these two rivals closer together if elotuzumab meets with success in phase 3 clinical trials. If the results from these studies are positive, AbbVie and Bristol could find themselves battling together against Celgene for a share of the high-dollar multiple myeloma market.
If at first you succeed -- try, try again
AbbVie isn't Bristol-Myers Squibb's only frenemy. Bristol is working with several other rivals, including Eli Lilly . These two companies started out as partners with cancer drug Erbitux in 2008, when Lilly bought Imclone Systems. Bristol and Imclone had previously cooperated in development of Erbitux.
That arrangement worked out nicely. Erbitux sales topped $700 million in 2011. If at first you succeed, why not try again? Bristol and Lilly decided that they would do so with another cancer drug -- necitumumab.
Unfortunately, this deal hasn't worked out as well so far. The two companies fought over rights to the drug, but announced an end to the dispute in early 2010. In February 2011, one of the late-stage trials for necitumumab was halted because of safety concerns arising from patients in the study experiencing blood clots.
Despite the setback, another phase 3 study for necitumumab has enrollment under way for treatment of squamous non-small-cell lung cancer. Bristol and Lilly have succeeded together before. It should be interesting to see if any new developments materialize this year.
Joint fight against joint pain
Another example of big pharma "co-opetition" to watch in 2013 is with Johnson & Johnson and GlaxoSmithKline . J&J's Janssen Biologics unit is collaborating with Glaxo in the development of sirukumab, an experimental drug targeting rheumatoid arthritis. The companies announced initiation of two phase 3 studies of sirukumab in August.
Glaxo already had two other drugs in its pipeline targeting rheumatoid arthritis when it began partnering with J&J in late 2011. However, sirukumab is the only one to progress to phase 3 trials thus far.
Rheumatoid arthritis is attracting a lot of attention from pharma companies. Many are focusing on oral medications, but sirukumab is administered via injection. That could be a competitive disadvantage should the drug ultimately gain regulatory approval. If the phase 3 results are impressive, though, sirukumab could become a legitimate contender. Watch to see if J&J and Glaxo become even closer frenemies in 2013.
Close and closer
There's an old saying that states: "Keep your friends close and your enemies closer." Big pharma continues to live out that maxim.
Why partner with a bitter rival? There are plenty of reasons, but it boils down basically to money. Partnering reduces the risk of losing large investments on drugs that don't pan out. It also helps pharma companies invest in more drugs than they would have otherwise, therefore increasing the number of opportunities for success. These arrangements between frenemies can help both sides make more money, which ultimately benefit investors.
After nearly 40 years, big pharma has an answer to the rock group War's question, "Why can't we be friends?" That answer, of course, is: "Why not?"
The article 3 Big Pharma Frenemies to Watch in 2013 originally appeared on Fool.com.Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.