Has COVID been injecting cash into pharma?

The impact of COVID on our lives and economies can, in many sectors, only be described as seismic. Casualties include the commercial property market, the hospitality and entertainment industries, and disruptions to supply chains have led to effects on a range of manufacturing and retail businesses. It seems like eons ago (in fact it was just last year, in the early days of the global pandemic) that I wrote about Supply Chain Disruption Going Viral, and considered how troubles in China were affecting many global pharma manufacturers’ abilities to make key ingredients. There were widespread concerns at the time that the pharma industry – often considered to be as ‘recession proof’ as an industry can be – would see significant financial challenges in the months ahead.

I was therefore quite curious, when asked to write something on this topic, to discover how the pharma industry had actually fared. Has pharma weathered the [cytokine] storm, or are pharma companies accumulating debt faster than they can say “coronavirus pandemic”?

Ill people buy medicines

It seems an obvious thing to say, but ill people buy medicines. Panic buying in the UK at the start of the COVID pandemic wasn’t limited to toilet paper – I distinctly remember finding it impossible to lay my hands on a packet of paracetamol for several weeks. Right from the start, people stocked up on preventative and curative products, in the hope that they would be able to stave off the worst infections.

On the other hand, it must be acknowledged that cut-backs and reduced access to other medical services led to shortfalls in other areas. I wrote in February this year about my concerns that, as we turned our gaze from other illnesses in our quest to “beat the virus”, we might approach a point at which more people died from other diseases, as a result of inaccessibility, than from COVID itself. Yet it was still saddening to read, a couple of months later, that a large systematic review covering 20 countries revealed a 33% decrease in healthcare utilization.1 This could well be expected to have had an impact on diagnoses, drug prescriptions, uptake and purchasing during the pandemic.

Naturally, once COVID-specific products became available, people clamoured for access. Governments of developed countries pre-ordered millions of doses of [at the time unproven] vaccines, or battled to keep batches on home soils for domestic use.

Injections of cash

According to a Forbes article published in July 2021,2 US giant Pfizer now expects to generate $33.5 billion from COVID vaccine sales alone in 2021. This is around 30% higher than the original estimate of $26 billion, with the new projections being based on the 2.1 billion doses of the Pfizer/BioNTech vaccine that the company expects to manufacture and deliver by the end of the year. As Pfizer's partner, BioNTech is benefiting from Pfizer's financial resources, global manufacturing capacity, and regulatory expertise. The company's mRNA technology was critical to the success of the vaccine, and that success is expected to drive BioNTech's fortunes in the coming years. However, some analysts argue that – because the company doesn't have to split profits with a partner – US pharmaceutical and biotechnology company Moderna is likely to make the most money from its own COVID vaccine, over the long run.

In August, an article in Reuters3 estimated that Pfizer, BioNTech and Moderna have together locked up over $60 billion in sales of COVID vaccines over 2021 and 2022 – by my calculation, that’s 4% of the total global pharma spend in 2019. Sales agreements already in place include supply of the initial two doses of their vaccines, as well as billions of dollars in potential boosters as wealthy nations plan to deliver winter booster shots “in a market that could rival the $6 billion in annual sales for flu vaccines for years to come.”3

In contrast, AstraZeneca’s pledge to ‘not profit' from their COVID vaccine, which was co-developed with the UK’s Oxford University, resulted in comparatively lower earnings. AstraZeneca’s COVID vaccine is reported to have generated $1.2bn in the first half of 2021,4 with sales tripling in the second quarter compared with the first, but the 2021 total income from the vaccine is unlikely to come anywhere near that of the other three companies presiding over the Western COVID market (Pfizer, BioNTech, Moderna). In an industry in which being the ‘first to market’ has always provided an inarguable revenue advantage, one can only guess whether AstraZeneca’s C-suite executives are seeing their situation as a bitter pill to swallow, or as a masterly stratagem to position themselves as the beating ethical heart of pharma.

Johnson & Johnson, which developed the fourth vaccine available to the Western market, has experienced manufacturing problems at a contractor's facility, and concerns about blood clotting have caused a temporary halt in the vaccine's administration in the US. However, as J&J were also selling their COVID vaccine at cost during the pandemic, these issues are reported to be of minimal concern to investors.

Although several COVID vaccines have reached the market, Gilead’s remdesivir remains the only antiviral that has been approved by the US Food and Drug Administration (FDA) for the treatment of COVID. Despite scientists at the World Health Organization saying the drug has “no meaningful effect” on mortality or the need for ventilation, the company saw a 26% rise in fourth-quarter 2020 revenue, driven by sales of remdesivir. Earlier this year, Gilead forecasted 2021 sales of up to $3 billion for the drug. If you want to get more information on COVID vaccines, Pharmasource would be your best choice.

Rise and fall

These wins have been faithfully reflected on the stock exchange. Shortly after Gilead announced their 2021 forecast, shares of the company were up 2.5% in extended trading. Subsequently, shares of Pfizer hit a record high in August 2021, for the first time in more than 20 years, as shares of the COVID vaccine makers surged amid rising cases in the US. The 4.9% percentage gain was the stock's biggest one-day rise since November 2020, when Pfizer released positive data for its COVID vaccine. This is a particularly impressive gain, when you consider that Pfizer's size makes it difficult for any product to substantially change its stock price. Shareholders must be particularly relieved at the successful impact of the COVID vaccine, as it compensates for recent clinical setbacks with some other products, and the loss of key patents for several drugs later this decade.

Predictably, AstraZeneca shareholders have not been as roundly rewarded. Still pending approval by the FDA, AstraZeneca vaccine sales have been predominantly within Europe, despite an unfortunate supply dispute with the European Commission. That dispute is now resolved, but AstraZeneca’s share price remains under pressure following discontinuation of their amyotrophic lateral sclerosis drug trial, due to lack of efficacy. Without profits from their COVID vaccine to buoy them through this choppy period, analysts are advising that AstraZeneca stock isn't a buy right now.5

Who to watch?

With only one anti-viral on the market, numerous companies are racing to develop an effective treatment for COVID. Examples include:

· Merck’s molnupiravir tablet is currently in Phase III trials and the company expects to have data by the end of 2021 – this oral product exerts its antiviral action through the introduction of copying errors during viral RNA replication.

· Pfizer is also carrying out late-stage trials of two antiviral products – a tablet that can be taken at home, and an intravenous infusion for hospitalised patients suffering from more serious symptoms – both of which are said to work by preventing the replication of the virus by blocking activity of the COVID protease.

· Synairgen is developing an inhaled interferon that acts by suppressing the production of interferon beta, which plays a role in activating the wider immune response and preventing the virus from replicating.

Such is the interest and urgency for such therapies that the FDA has created a special emergency program for possible COVID treatments, called the Coronavirus Treatment Acceleration Program (CTAP). Similarly, the European Medicines Agency (EMA) is interacting with developers of potential COVID treatments to hasten products to market. Programs such as these – driven by the FDA and EMA – will ensure that promising medicines reach patients as soon as possible; they will of course also ensure that the companies developing them receive a return on their investments as soon as possible.

At the end of 2019, before the availability of COVID vaccines and treatments, the total global pharmaceutical market was valued at around $1.27 trillion. Most analysts appear to be suggesting CAGR of around 7% going forward, with COVID cited as a factor underlying some – but not all – of that market growth in the near future. It seems reasonable to conclude that pharma has survived the pandemic intact, with minimal impact of the financial challenges we feared.

The pharma industry has also recovered from some of its pre-pandemic reputational issues, as consumers have turned to big pharma for solutions, giving the industry an important opportunity to improve public engagement and trust.

I can’t help thinking that AstraZeneca, in particular, and their non-profit pledge with Oxford University, have helped with that. Compared with a damning report published in September 2019,6 which revealed deep public mistrust and criticisms of high drug costs, truly socially responsible pledges – like not profiting from a global pandemic – have surely made the public realise that it’s not all bad.

It’s not often I get to say this, so I’m going to type this very slowly, and relish the moment… it actually makes me quite proud to be British.

References

1.Moynihan et al. BMJ Open 2021;11:e045343 (doi: 10.1136/bmjopen-2020-045343) 

2. Pratap A. Forbes July 28, 2021. (https://www.forbes.com/sites/aayushipratap/2021/07/28/pfizer-expects-335-billion-in-vaccine-revenue-in-2021/?sh=1c48e818217d)

3.Erman M. Reuters August 13, 2021 (https://www.reuters.com/business/healthcare-pharmaceuticals/pfizer-moderna-seen-reaping-billions-covid-19-vaccine-booster-market-2021-08-13/)

4. Kollewe J. The Guardian July 29, 2021 (https://www.theguardian.com/business/2021/jul/29/astrazeneca-sales-of-covid-vaccine-triple-in-first-half-of-2021)

5. Gatlin A. Investor’s Business Daily September 9, 2021 (https://www.investors.com/news/technology/astrazeneca-stock-buy-now/)

6. Rees V. European Pharmaceutical Review September 5, 2019 (https://www.europeanpharmaceuticalreview.com/news/98772/pharma-reputation-worst-among-other-industries-in-us/)