Antitrust regulators recently surprised industry watchers with the stipulation that Bristol-Myers Squibb sell Celgene's Otezla to win U.S. clearance for its $74 billion merger. But since then, as there’s no way around it, analysts have pulled out their calculators trying to put a dollar figure on the drug.

Otezla could get Bristol about $5.4 billion, Bernstein analyst Ronny Gal said in a Monday note to clients. But his peers at Credit Suisse, Jefferies, RBC Capital and Wolfe Pharma are modeling around $8 billion to $10 billion.

As Gal put it: "This is primarily a question of IP."

Most of the patents around Otezla expire in September 2023, Gal noted. There is one patent covering its use in psoriatic arthritis that expires in 2034, which Gal said could be bypassed because it’s a small carveout covered by what’s known as a "section VIII statement" under Hatch-Waxman, where a generic drugmaker can seek approval by carving out a protected indication.  

The main controversy lies in a patent covering "optically pure" Otezla that expires in August 2028. While the other analysts based their calculations on Otezla exclusivity lasting at least into 2028, Gal argued the 2028 patent "has to be viewed as suspect given [composition of matter] expires earlier and ~20 generics challenged the patent."

Gal figures a buyer could get away with paying the full price for the drug through the 2023 patent cliff and then for only 33% odds of it reaching 2028. Currently, consensus pegs Otezla's 2020 sales at $2.06 billion, jumping to $2.42 billion in 2023 and then plateauing at $2.49 billion throughout 2028. After considering direct costs of $600 million—because psoriasis is a highly competitive market—and an acquirer tax rate of 20% and 7.5% discount rate, Gal arrived at $5.4 billion.

For RBC Capital Markets analyst Brian Abrahams’ team, annual revenue estimates for Otezla are largely in line with the Street’s average, though slightly higher. Abrahams applied a 9% discount rate that considers potential unfavorable IP developments and competition from TYk2 inhibitors, such as the BMS-986165 candidate that Bristol is keeping instead of the Celgene drug. Assuming exclusivity into 2028, "fair value would be $8B for the franchise, potentially as much as $10B with a modest premium in a competitive bidding situation," he said in a June 25 investor’s note.

Jefferies analyst Michael Yee also put Otezla’s value at four to five times sales, or $8 billion to $10 billion, even though he acknowledged BMS may not fetch the high end given that buyers know the New York pharma has to sell the product.

Credit Suisse’s Vamil Divan expressed a similar opinion. "Given Bristol is a forced seller in this situation, we would be surprised if they obtain a significant premium for the asset, but the range of possible buyers suggests to us that they likely do not need to sell it at a significant discount either," he noted recently. He said his shop’s database suggests Otezla is worth $9.3 billion.

Now, who could take Otezla over, especially given the U.S. Federal Trade Commission’s stricter stance on pharma M&A that caused the sale in the first place?

"[A] buyer presumably must not have too much direct overlap but yet is interested in immunology and dermatology," Jefferies’ Yee said. "This seems to be threading a needle." He figured some specialty pharma or European firms might pull it off, as most Big Biotech and Big Pharma companies already have direct competitors.

Novartis has Cosentyx, Amgen has Enbrel, AbbVie has Humira and Skyrizi, Eli Lilly has Taltz, and Johnson & Johnson has Tremfya, just to name a few. These companies might be interested, but the stress is on "assuming they do not see any regulatory concerns," Credit Suisse’s Divan said. RBC’s Abrahams added Gilead to the list, saying that it could benefit from bolting on an immunology infrastructure ahead of the launch of its JAK1 inhibitor filgotinib.

For his part, Bernstein’s Gal argued "we can't really see FTC limiting psoriasis companies with non-dominant share and only injectable (JNJ, BI, NVS, AMGN) or pipeline assets only (GILD)." He listed Gilead, J&J and Amgen as potential buyers.