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Drugmakers brace for serious headwinds ahead

Yahoo Finance’s Anjalee Khemlanin joins the Live show to discuss quarterly earnings for Abbvie, Merck & Company, and Biogen, the headwinds facing drugmakers, and what they mean for investors watching the pharmaceuticals space.

Video transcript

BRAD SMITH: More pain ahead for pharmaceuticals here. Earnings from big players like Merck and AbbVie setting the tone for an industry with a mixed quarterly outlook.

Here with a read on the headwinds facing drugmakers and what this means for investors watching the space is Yahoo Finance's Anjalee Khemlani. Anj, what have we seen so far?

ANJALEE KHEMLANI: Well, as we know from the last week with J&J and others, we're seeing a little bit of a mixed outlook for this sector. Let's take a look first at AbbVie, which we saw facing a little bit of pressure from generic competition-- not as much as they expected. But for Humira, they did expect that to come in in the first quarter as we saw, you know, that rush to include biosimilars on formularies. So we're seeing how that's playing out. Not too much of a hit just yet. Still the stock is down.

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Meanwhile, Merck loses big on the decline of the COVID treatment molnupiravir, down by I think more than 80% was the number, so that's huge. But, of course, it's got a diverse portfolio, so they were able to buck up with Keytruda, their blockbuster, and Gardasil.

Still some headwinds there for Keytruda. As we know, it's coming into potentially the falling-- the fall off of the patent. So that's sort of where the focus is.

If you look at sort of the upside for these companies, it really is just looking at the broader outlook for the portfolio. We've seen some pulling back even on pipelines. Taking a look at Biogen and Novartis this week reporting a decline in their pipelines. Biogen cutting a little bit, and Novartis cutting 10% of its portfolio. And so you can see sort of this right sizing, focusing on blockbusters as well.

Eli Lilly, meanwhile, did get some positive results out of its obese diabetics-- sorry, for Mounjaro. There would be reduction in weight loss for obese diabetics by 16%, so that's pretty good. Definitely some positives there.

So all told, as you can see, downside is definitely generics pressure, either immediate or upcoming, as well as the loss of the COVID drugs or, you know, portfolio for products for whoever did have it. And then on the upside, you see more long-term growth, long-term outlook, and upgrading their 2023 outlook as well.

JULIE HYMAN: Yeah, it's interesting to see all of this sort of resetting, right, re-table-setting following as we get out of the pandemic. One of the ways, of course, a lot of them have been building up pipelines is through making acquisitions.

ANJALEE KHEMLANI: Yes.

JULIE HYMAN: And presumably there will be more of those. Do we see that sort of, like, bearing fruit, and is this going to be another big deal year for these companies?

ANJALEE KHEMLANI: So far yes. So far, it looks like-- of course, we've already seen some of the big ones like Pfizer, right, but we definitely know that they are looking. Merck has been struggling to acquire more assets. That's been one of the concerns from investors, and we've seen those analyst notes pointing to that.

But we do know that it's gearing up to be a pretty big year. There is a shift in what may be, you know, a nice target for these companies. Previously we know cancer has been huge, but it seems like that's not getting as much excitement this year. So it's going to be interesting to see what disease state and what sector really gets all that attention this year.

BRAD SMITH: Yahoo Finance--

JULIE HYMAN: Good if cancer would get--

ANJALEE KHEMLANI: I know.

JULIE HYMAN: --some attention.

BRAD SMITH: Well, yeah. Absolutely.

JULIE HYMAN: Anyway.

BRAD SMITH: Yahoo Finance's own Anjalee Khemlani, thanks so much.