Drugmakers Spent Freely in 2022 to Protect Revenue

Pfizer Inc.

and

Amgen Inc.

are among cash-flush companies that bought makers of approved drugs for treating migraines, inflammation and other ailments.

Bristol-Myers Squibb Co.

and

GSK

PLC bought companies with experimental cancer drugs that had finished late-stage studies.

Of the 11 biotech companies acquired in 2022 in deals with values of at least $1 billion, six sold at least one approved drug, according to a Wall Street Journal analysis. Last year big drugmakers acquired four companies with at least one approved drug, while the remaining deals involved biotechs whose most-advanced drugs were still in clinical trials, the Journal’s analysis showed.

The 11 deals in 2022 totaled roughly $65 billion, compared with 15 deals with values of at least $1 billion that added up to about $60 billion in 2021, according to research firm DealForma LLC.

One reason purchasers looked for proven products in 2022 is that some top-selling drugs are due to lose patent protection before the end of the decade, opening them to competition from generics. The loss of exclusivity is expected to cost big drugmakers 23% of their sales between 2023 and 2030, according to analysts at

JPMorgan Chase

& Co.

“You know it will generate revenues and growth for you in the time frame that you need, and 2025 to 2030 for Big Pharma is going to be a very, very difficult time,” said

Eric Tokat,

a partner at Centerview Partners LLC who advises biotech companies on deals.

Pharmaceutical companies often look outside their own laboratories for growth in part because drug development takes a long time and experimental drugs often fail in testing. But acquiring a biotech only with an early-stage pipeline can be cheaper than more advanced drugs because their prospects for success are less secure. 

Big companies that need large amounts of revenue to make up for patent expirations over the next several years can’t buy early-stage drugs assuming they will generate revenue quickly enough, said

Punit Mehta,

a senior managing director in healthcare investment banking for Guggenheim Securities LLC. 

Deals for biotechs with approved or promising drugs help large companies with experience growing new brands expand into new treatment areas, said

Tom Davidson,

a partner at investment bank

PJT Partners Inc.

“The amount of innovation that occurs within these smaller and maturing biotech companies is significant but the products are often more effectively marketed by the larger companies,” Mr. Davidson said.

Although the deals for approved and tested products reduce the regulatory risk of the U.S. Food and Drug Administration not approving products, acquirers take on challenges, too, in integrating products into their portfolios and generating enough sales to justify what they paid. 

The year’s largest pharmaceutical deal, Amgen’s $27.8 billion cash agreed-upon acquisition of

Horizon Therapeutics

PLC, included several approved drugs. Horizon’s deal process drew wide interest from prospective buyers in part because few approved drugs are available for purchase, according to people familiar with the matter and company filings.

Amgen, which had some $9.5 billion in cash and equivalents on hand as of Sept. 30, agreed to pay a nearly 50% premium on Horizon’s share price. Its shares were trading at $78.76 on Nov. 29, the day before the Journal reported the sales talks. Amgen agreed to pay $116.50 a share of Horizon stock. 

Amgen also acquired ChemoCentryx Inc. in October for about $4 billion in cash, which gave Amgen Tavneos, an inflammation drug. It paid more than twice ChemoCentryx’s share price the day before the deal was disclosed.

Among Amgen’s drugs facing patent expiration is Enbrel, an anti-inflammatory drug, which is due to lose patent protection toward later this decade and experience a sales decline from $4 billion this year to $2.3 billion in 2027, according to FactSet.

Horizon’s top-selling drug is Tepezza, the first approved treatment for thyroid eye disease, a rare condition that causes bulging eyes. The drug is expected to generate more than $3 billion in sales in 2025, according to analysts at William Blair & Co. Horizon’s gout treatment Krystexxa is forecast to generate $1 billion in sales in 2025, according to William Blair. 

Pfizer’s $80 billion in global sales from Covid-19 vaccines and drugs has given it a well-stocked war chest for deal making. Pfizer paid $5.4 billion in cash in October for Global Blood Therapeutics and its drug Oxbryta, which is approved for treating sickle-cell disease. Pfizer also received GBT’s experimental sickle-cell treatments undergoing clinical testing.

Pfizer’s $11.6 billion acquisition of Biohaven Pharmaceutical Holding Co. gave the company an approved migraine treatment, Nurtec, another drug under regulatory review, and five experimental treatments that haven’t started human testing. 

The deals are helping Pfizer reach its goal of $25 billion in revenue from business-development moves such as deal making by 2030, said

Aamir Malik,

Pfizer’s chief business innovation officer. Pfizer said it also expects internal drug development to help offset patent expirations, generating some $20 billion in annual sales by 2030.  

Bristol’s $4.1 billion all-cash acquisition of Turning Point Therapeutics this year, fetched a 122% premium, according to analysts at

SVB Securities

LLC. The deal gave Bristol a cancer drug that showed positive results in its late-stage study and was close to being submitted for approval.

Bristol expects to seek regulatory approval next year for the drug, repotrectinib, said

Elizabeth Mily,

who leads strategy and business development for Bristol. If it is approved, sales could help offset future declines in revenue from Bristol’s Opdivo and Yervoy cancer drugs, for which some patents expire before 2030.

Write to Jared S. Hopkins at jared.hopkins@wsj.com and Laura Cooper at laura.cooper@wsj.com

Pfizer Inc.

and

Amgen Inc.

are among cash-flush companies that bought makers of approved drugs for treating migraines, inflammation and other ailments.

Bristol-Myers Squibb Co.

and

GSK

PLC bought companies with experimental cancer drugs that had finished late-stage studies.

Of the 11 biotech companies acquired in 2022 in deals with values of at least $1 billion, six sold at least one approved drug, according to a Wall Street Journal analysis. Last year big drugmakers acquired four companies with at least one approved drug, while the remaining deals involved biotechs whose most-advanced drugs were still in clinical trials, the Journal’s analysis showed.

The 11 deals in 2022 totaled roughly $65 billion, compared with 15 deals with values of at least $1 billion that added up to about $60 billion in 2021, according to research firm DealForma LLC.

One reason purchasers looked for proven products in 2022 is that some top-selling drugs are due to lose patent protection before the end of the decade, opening them to competition from generics. The loss of exclusivity is expected to cost big drugmakers 23% of their sales between 2023 and 2030, according to analysts at

JPMorgan Chase

& Co.

“You know it will generate revenues and growth for you in the time frame that you need, and 2025 to 2030 for Big Pharma is going to be a very, very difficult time,” said

Eric Tokat,

a partner at Centerview Partners LLC who advises biotech companies on deals.

Pharmaceutical companies often look outside their own laboratories for growth in part because drug development takes a long time and experimental drugs often fail in testing. But acquiring a biotech only with an early-stage pipeline can be cheaper than more advanced drugs because their prospects for success are less secure. 

Big companies that need large amounts of revenue to make up for patent expirations over the next several years can’t buy early-stage drugs assuming they will generate revenue quickly enough, said

Punit Mehta,

a senior managing director in healthcare investment banking for Guggenheim Securities LLC. 

Deals for biotechs with approved or promising drugs help large companies with experience growing new brands expand into new treatment areas, said

Tom Davidson,

a partner at investment bank

PJT Partners Inc.

“The amount of innovation that occurs within these smaller and maturing biotech companies is significant but the products are often more effectively marketed by the larger companies,” Mr. Davidson said.

Although the deals for approved and tested products reduce the regulatory risk of the U.S. Food and Drug Administration not approving products, acquirers take on challenges, too, in integrating products into their portfolios and generating enough sales to justify what they paid. 

The year’s largest pharmaceutical deal, Amgen’s $27.8 billion cash agreed-upon acquisition of

Horizon Therapeutics

PLC, included several approved drugs. Horizon’s deal process drew wide interest from prospective buyers in part because few approved drugs are available for purchase, according to people familiar with the matter and company filings.

Amgen, which had some $9.5 billion in cash and equivalents on hand as of Sept. 30, agreed to pay a nearly 50% premium on Horizon’s share price. Its shares were trading at $78.76 on Nov. 29, the day before the Journal reported the sales talks. Amgen agreed to pay $116.50 a share of Horizon stock. 

Amgen also acquired ChemoCentryx Inc. in October for about $4 billion in cash, which gave Amgen Tavneos, an inflammation drug. It paid more than twice ChemoCentryx’s share price the day before the deal was disclosed.

Among Amgen’s drugs facing patent expiration is Enbrel, an anti-inflammatory drug, which is due to lose patent protection toward later this decade and experience a sales decline from $4 billion this year to $2.3 billion in 2027, according to FactSet.

Horizon’s top-selling drug is Tepezza, the first approved treatment for thyroid eye disease, a rare condition that causes bulging eyes. The drug is expected to generate more than $3 billion in sales in 2025, according to analysts at William Blair & Co. Horizon’s gout treatment Krystexxa is forecast to generate $1 billion in sales in 2025, according to William Blair. 

Pfizer’s $80 billion in global sales from Covid-19 vaccines and drugs has given it a well-stocked war chest for deal making. Pfizer paid $5.4 billion in cash in October for Global Blood Therapeutics and its drug Oxbryta, which is approved for treating sickle-cell disease. Pfizer also received GBT’s experimental sickle-cell treatments undergoing clinical testing.

Pfizer’s $11.6 billion acquisition of Biohaven Pharmaceutical Holding Co. gave the company an approved migraine treatment, Nurtec, another drug under regulatory review, and five experimental treatments that haven’t started human testing. 

The deals are helping Pfizer reach its goal of $25 billion in revenue from business-development moves such as deal making by 2030, said

Aamir Malik,

Pfizer’s chief business innovation officer. Pfizer said it also expects internal drug development to help offset patent expirations, generating some $20 billion in annual sales by 2030.  

Bristol’s $4.1 billion all-cash acquisition of Turning Point Therapeutics this year, fetched a 122% premium, according to analysts at

SVB Securities

LLC. The deal gave Bristol a cancer drug that showed positive results in its late-stage study and was close to being submitted for approval.

Bristol expects to seek regulatory approval next year for the drug, repotrectinib, said

Elizabeth Mily,

who leads strategy and business development for Bristol. If it is approved, sales could help offset future declines in revenue from Bristol’s Opdivo and Yervoy cancer drugs, for which some patents expire before 2030.

Write to Jared S. Hopkins at jared.hopkins@wsj.com and Laura Cooper at laura.cooper@wsj.com