Drug companies face Covid cliff as sales set to plummet this year

Pfizer has said it expects that revenue to drop to around $21.5bn (€20bn) in 2023, although some analysts believe that forecast is overly optimistic. Picture: Dan Linehan

Pharmaceutical companies that made billions from the pandemic over the past two years selling vaccines and treatments are now up against a steep Covid cliff and investor pressure to spend their windfalls wisely.

Drugmakers including Pfizer, BioNTech, Moderna, Gilead Sciences, AstraZeneca, and Merck are estimated to have brought in about $100bn (€92bn) in revenue from Covid vaccines and treatments in 2022.

Company and analyst estimates suggest those sales could fall by nearly two-thirds this year 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 (€9.2bn) deals to build their portfolio and I think they need to do something bigger and more impactful," he said, referring to the $5.4bn (€5bn) buyout of Global Blood Therapeutics and $11.6bn (€10.7bn) purchase of migraine drugmaker Biohaven Pharmaceutical.

Pfizer has been the biggest corporate beneficiary of the pandemic financially, with more than $56bn (€52bn) 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 (€20bn) in 2023, although some analysts believe that forecast is overly optimistic.

"We remain sceptical that Covid revenues will grow in 2024 and beyond," JP Morgan analyst Chris Schott said, 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 vaccine, pulled in around $18.4bn (€17bn) in 2022. Analysts expect that to drop to around $7bn (€6.4bn) in 2023. The company is due to report earnings later this month.

- Reuters