Over the Pill
Welcome to “Over the Pill”, the Berenberg podcast where Kerry Holford & Luisa Hector lift the curtain on the messy reality of analysing pharma share prices. With over 30 years of friendship, Kerry & Luisa invite listeners into their regular debates on pharma strategy, drug pipeline prospects and commercial power.
Over the Pill
Episode 7
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It’s time for Top of the Pills 2026! Kerry and Luisa discuss their analysis of the top 50 drugs by NPV from Berenberg DrugBank. The team also highlight their “Annual check-up” series, detailing key findings from pharma annual reports, including AstraZeneca, AbbVie, UCB and Pfizer.
Hi, I'm Louisa Hector.
SPEAKER_01And I'm Carrie Holford.
SPEAKER_00Welcome to Over the Pill, the weekly podcast on the latest hot topics in pharma investing. So a few notes out today.
SPEAKER_01Yes, we've been busy. So today we've published our top of the pills. So having updated drug bank, today the note focuses on the top 50 drugs, which in total equate to $2.1 trillion of value. And we've updated our lovely pretty picture. I love that pill. It's always a good one.
SPEAKER_00And we have a new picture this year, the snake.
SPEAKER_01We do. That's what we're calling it. So do look out for that, listeners. Within that note, we highlight that not surprisingly, diabetes obesity is still a big contributor to the top 50. ZEP pound, Wikovi, Ozempec, representing around a quarter of that total value. Again, not surprisingly, within that Lily's ARP, Novo has declined. And that concentration risk that we've talked about previously is clearly now playing out. Also, interestingly, we have a new entrant from UCB. Bimzelex now coming into our top 50 with our peak estimate for that product of at least 8 billion euros. And warming up again from a therapeutic perspective, we'd highlight oncology.
SPEAKER_00Yeah, so then we've also been publishing our annual checkups. So we get the annual reports. Uh takes a little bit of time to read through it all, and we pull out some new new information, things that we find interesting. I think I've published on four of mine. You're a bit behind, aren't you?
SPEAKER_01Not. I've only got one left.
SPEAKER_00Oh, okay, you're ahead.
SPEAKER_01Yeah, TSK always brings up the rear because they publish late.
SPEAKER_00All right. Well, from my side, and today we published Astra, but I've also uh put out the comments on Roche, Abvi, and Bristol. ABVI, we highlighted from the annual report that Sky Rizi has got a new patent. So its method of use to 2036 in the dermatology indications. Now that came up because they increased their contingent liability. This is the royalty payments due to partner Bering Ingelheim. So the liability went up by six and a half billion, and a portion of that was an extra two to three years of royalty burden. So this is in fact factored in to our MPV for Sky Rizzy, but I just wanted to connect it with top of the pills. So SkyRZI is number two by value in the pill. And certainly it looks like there's perhaps a little bit of potential that they will be protected for longer than we're modelling. We actually have biosimilar erosion from around 2034. So we'll see whether they kind of guide to this patent being actually more impactful and protecting from biosimilars as well as carrying the longer royalty burden. Then on AstraZeneca, so that was the note out today. This is always a fun one. So we get the remuneration information in the annual report. And so we can look at the targets for the annual bonus and also for the longer term, the LTIP. And for Astra, we do get these dollar values for cash flow targets. So a portion of the annual and the long-term incentive is linked to cash flow in dollar, billions of dollars. So we can do a little bit of work with this, some analysis. So on the cash flow, we get the targets now for the 2076 to 2028 LTIP. It's a cumulative number and it's a range, and he gets paid more as he approaches the top end of the range, which he always hits. So we can look at this and use it to just check on our margin assumptions with the connection from cash flow, thinking about CapEx, but then back up to eBITDA. So actually, it leads us to be pretty confident in our 2028 margin. We get to 36%. That's where consensus is landing. And so I would say we're comfortable with that number. Not seeing any upside to that, but certainly very comfortable with where we and consensus are landing. A couple of other things I noticed rebates, that's another thing we get from these annual reports. Big step up in Astra. Also saw this with Bristol. So that was the part D redesign kicking in to lead to a bigger rebate within the Medicare component of those rebate numbers, which, you know, they all do this on a different basis, but we can sort of see that definitely occurring within Astra and Bristol. And then since Astra is the pipeline play, commentary on how AI is assisting RD. So they made a very specific comment. 90% of the small molecule discovery pipeline is now AI assisted. And I just wanted to connect that because you and I had a very nice chat with Alan Hipper, CFO of Roche, and Bruno Eshley. So that was uh last week. And again, we got onto this topic of the impact of AI on the drug development, drug candidates, etc. Um, it's slower than the benefits we're seeing in other phases of the PL or stages of development and also savings across the PL. But certainly they also made this comment and they were more specific on large molecules. They now expect 100% of G-RED large molecules to be AI assisted. So something maybe we can start to track because it's been difficult for us to analyze and compare AI and drug development for these companies. What about your annual checkups?
SPEAKER_01So I'm pretty much there, as I said. So the ones that last week um kind of stood out with sort of interesting little snippets, UCB, which we've actually published today. Just from that interesting that they highlight they failed to hit an internal time to access target, um, which was as a result of price and access negotiations taking longer than anticipated. The reference there was to the tough economic environment and pressure on budgets. So um no specifics on on locations, but clearly things have taken a little longer through 2025 to um finalize than expect. And then that did negatively impact the CEO's long-term performance payout as well in 2025. And then the annual checkup on Pfizer. Interesting here that they've detailed an incremental $600 million of cost synergies by the end of this year relating to the MetSera acquisition.
SPEAKER_00How is that happening?
SPEAKER_01Right. So they say that this is to focus efforts on achieving an appropriate cost structure for the combined company. And clearly, cost savings were not slated as a reason to acquire this company, but synergies appear to be achievable. And just to give you some context, MetSera's annualized OPEX last year was around $300 million, more than 80% of which is RD. So something is being pulled out as a result of that deal. Good. Anything else from your side?
SPEAKER_00No, I think that's covered it. What about the agenda for this week?
SPEAKER_01Yeah. Um, so I'm off to the Berenburg UK conference tomorrow at the Grove. Um, we'll be hosting GSK at that conference. So we'll come back with uh feedback from that next week. But um, other than that, more annual checkups to work on, more to do. So we shall get back to the desk, Louisa. Um, listeners, we would love to hear your feedback, requests. Please do email us at kerry.holford or louisa.hector at Berenberg.com. Thank you for listening.