Pharma took in $100bn from Covid-19 — what will they do with it, investors ask
Vaccine maker Moderna’s only product — its messenger RNA Covid-19 vaccine — took in about $18.4bn in 2022, and analysts expect that to fall to about $7bn in 2023
06 February 2023 - 17:23
bymichael erman and patrick wingrove
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New York — Pharmaceutical companies that made billions from the pandemic over the past two years selling vaccines and treatments are now up against a steep Covid-19 cliff and investor pressure to spend their windfalls wisely.
Western drugmakers including Pfizer, BioNTech, Moderna, Gilead Sciences, AstraZeneca and Merck are estimated to have brought in about $100bn in revenue from Covid-19 vaccines and treatments in 2022.
Company and analyst estimates suggest those sales could fall by nearly two-thirds in 2023 due to built-up product inventories around the world including in the countries that pay the most. Population immunity from high rates of vaccination and previous infections means that demand for treatments could dip as well.
These companies are used to steep revenue drops known as patent cliffs that occur when their exclusivities on big-selling drugs expire and generic rivals move in, but they strategise for those swings for years.
“When you think about traditional drug and vaccine development and longevity of sales, it's usually much more spread out,” Morningstar analyst Damien Conover said. “This is very, very concentrated.”
The sudden inflow of revenue should prod companies to strike deals and link up with new partners, he said.
BMO Capital Markets analyst Evan Seigerman said companies should use the quick cash for transformative deals.
“Pfizer did these $10bn deals to build their portfolio and I think they need to do something bigger and more impactful,” he said, referring to the $5.4bn buyout of Global Blood Therapeutics and $11.6bn purchase of migraine drugmaker Biohaven Pharmaceutical.
Pfizer has been the biggest corporate beneficiary of the pandemic financially, with more than $56bn in 2022 revenue from the vaccine it developed with German partner BioNTech and from its Covid-19 antiviral treatment Paxlovid.
Pfizer has said it expects that revenue to drop to around $21.5bn in 2023, although some analysts believe that forecast is overly optimistic.
“We remain sceptical that Covid-19 revenues will grow in 2024 and beyond,” JPMorgan analyst Chris Schott said in a research note, adding that vaccination rates could fall even further than the significant decline seen with booster shots in 2022.
Vaccine maker Moderna also expects 2023 revenue to fall sharply. The company’s only product — its messenger RNA Covid-19 vaccine — pulled in about $18.4bn in 2022. Analysts expect that to drop to about $7bn in 2023. The company is due to report earnings later in February.
Oppenheimer & Co analyst Hartaj Singh said investors are “frustrated Moderna hasn’t used their firepower more effectively to prepare for revenues and earnings going down in 2023 or 2024”.
Moderna shares are up in recent months, but a $173.25 closing price on Friday is more than 65% off their pandemic high of close to $500 in August 2021.
“There are examples of companies that have sat on their hands and the share price has not done well, and Moderna could go down that path,” Singh cautioned.
Merck and Lilly plan for decline
Other companies have seen a more modest effect from their Covid-19 businesses.
“We are not counting on Lagevrio as a driver of growth for our business,” Merck CEO Rob Davis said in an interview last week about the company's antiviral pill. “We very much saw Lagevrio as an opportunity to make a meaningful difference at a time of need.”
Merck reported sales of $5.7bn from the treatment in 2022. Analysts expect that to drop below $1bn in 2023. Merck had more than $59bn in total sales in 2022.
Eli Lilly made $2bn in 2022 from monoclonal antibody Covid-19 treatments and is not expecting any revenue from the business in 2023.
The US Food and Drug Administration pulled its authorisation of Lilly’s latest antibody, bebtelovimab, in November because it was not effective against circulating Omicron subvariants.
“We did fine with Covid-19,” Eli Lilly CEO Dave Ricks said in an interview. “We made a little bit of money with it. What we did with that was we mostly reinvested it in R&D (research and development), and last year was a record R&D spending year for the company.”
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Pharma took in $100bn from Covid-19 — what will they do with it, investors ask
Vaccine maker Moderna’s only product — its messenger RNA Covid-19 vaccine — took in about $18.4bn in 2022, and analysts expect that to fall to about $7bn in 2023
New York — Pharmaceutical companies that made billions from the pandemic over the past two years selling vaccines and treatments are now up against a steep Covid-19 cliff and investor pressure to spend their windfalls wisely.
Western drugmakers including Pfizer, BioNTech, Moderna, Gilead Sciences, AstraZeneca and Merck are estimated to have brought in about $100bn in revenue from Covid-19 vaccines and treatments in 2022.
Company and analyst estimates suggest those sales could fall by nearly two-thirds in 2023 due to built-up product inventories around the world including in the countries that pay the most. Population immunity from high rates of vaccination and previous infections means that demand for treatments could dip as well.
These companies are used to steep revenue drops known as patent cliffs that occur when their exclusivities on big-selling drugs expire and generic rivals move in, but they strategise for those swings for years.
Pharma industry seeks meeting with officials over ‘puzzling’ medicine price increase set by health minister
“When you think about traditional drug and vaccine development and longevity of sales, it's usually much more spread out,” Morningstar analyst Damien Conover said. “This is very, very concentrated.”
The sudden inflow of revenue should prod companies to strike deals and link up with new partners, he said.
BMO Capital Markets analyst Evan Seigerman said companies should use the quick cash for transformative deals.
“Pfizer did these $10bn deals to build their portfolio and I think they need to do something bigger and more impactful,” he said, referring to the $5.4bn buyout of Global Blood Therapeutics and $11.6bn purchase of migraine drugmaker Biohaven Pharmaceutical.
Pfizer has been the biggest corporate beneficiary of the pandemic financially, with more than $56bn in 2022 revenue from the vaccine it developed with German partner BioNTech and from its Covid-19 antiviral treatment Paxlovid.
Pfizer has said it expects that revenue to drop to around $21.5bn in 2023, although some analysts believe that forecast is overly optimistic.
“We remain sceptical that Covid-19 revenues will grow in 2024 and beyond,” JPMorgan analyst Chris Schott said in a research note, adding that vaccination rates could fall even further than the significant decline seen with booster shots in 2022.
Vaccine maker Moderna also expects 2023 revenue to fall sharply. The company’s only product — its messenger RNA Covid-19 vaccine — pulled in about $18.4bn in 2022. Analysts expect that to drop to about $7bn in 2023. The company is due to report earnings later in February.
Oppenheimer & Co analyst Hartaj Singh said investors are “frustrated Moderna hasn’t used their firepower more effectively to prepare for revenues and earnings going down in 2023 or 2024”.
Moderna shares are up in recent months, but a $173.25 closing price on Friday is more than 65% off their pandemic high of close to $500 in August 2021.
“There are examples of companies that have sat on their hands and the share price has not done well, and Moderna could go down that path,” Singh cautioned.
Merck and Lilly plan for decline
Other companies have seen a more modest effect from their Covid-19 businesses.
“We are not counting on Lagevrio as a driver of growth for our business,” Merck CEO Rob Davis said in an interview last week about the company's antiviral pill. “We very much saw Lagevrio as an opportunity to make a meaningful difference at a time of need.”
Merck reported sales of $5.7bn from the treatment in 2022. Analysts expect that to drop below $1bn in 2023. Merck had more than $59bn in total sales in 2022.
Eli Lilly made $2bn in 2022 from monoclonal antibody Covid-19 treatments and is not expecting any revenue from the business in 2023.
The US Food and Drug Administration pulled its authorisation of Lilly’s latest antibody, bebtelovimab, in November because it was not effective against circulating Omicron subvariants.
“We did fine with Covid-19,” Eli Lilly CEO Dave Ricks said in an interview. “We made a little bit of money with it. What we did with that was we mostly reinvested it in R&D (research and development), and last year was a record R&D spending year for the company.”
Reuters
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