Pharma delivers, for others

An employee works in a lab at the Regeneron Pharmaceuticals Westchester campus in Tarrytown, New York
An employee works in a lab at the Regeneron Pharmaceuticals Westchester campus in Tarrytown, New York, U.S. September 17, 2020. Picture taken September 17, 2020.

NEW YORK, March 23 (Reuters Breakingviews) - Regeneron Pharmaceuticals (REGN.O) and Sanofi (SASY.PA) have shown their blockbuster asthma and eczema drug, Dupixent, works unexpectedly well against chronic obstructive pulmonary disease (COPD). The progressive lung disease, which commonly crops up in heavy smokers, is the third biggest cause of death globally. A 30% reduction in exacerbations and significant lung function improvement means the drug should spin more profit. But like new and effective obesity drugs, a larger benefit will probably flow to society.

Investors tacked $15 billion onto the two companies’ combined market capitalizations on Thursday morning. Since the two are valued at about 4 times estimated sales, this implies about $6 billion of additional annual global revenue in five years, assuming a 10% discount rate. The payout for the U.S. economy is even bigger. The Centers for Disease Control and Prevention estimated in 2018 that COPD would cost the country about $50 billion a year by 2020. Smoking-related diseases deplete the workforce, which is already getting older.

The drugmakers themselves don’t have it so good. Deloitte estimates projected returns on drug development for the biggest pharma firms were 1.2% last year. Writ large, the world might be getting too good of a bargain. (By Robert Cyran)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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