NEW YORK, Feb 6 (Reuters) - 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.
Western drugmakers including Pfizer Inc, BioNTech SE, Moderna Inc, Gilead Sciences Inc, AstraZeneca Plc and Merck & Co are estimated to have brought in about $100 billion 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 strategize 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 $10 billion deals to build their portfolio and I think they need to do something bigger and more impactful," he said, referring to the $5.4 billion buyout of Global Blood Therapeutics and $11.6 billion purchase of migraine drugmaker Biohaven Pharmaceutical.
Pfizer has been the biggest corporate beneficiary of the pandemic financially, with more than $56 billion 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 $21.5 billion in 2023, although some analysts believe that forecast is overly optimistic.
"We remain skeptical that COVID revenues will grow in 2024 and beyond," JP Morgan 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 vaccine - pulled in around $18.4 billion in 2022. Analysts expect that to drop to around $7 billion in 2023. The company is due to report earnings later this month.
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, LILLY PLAN FOR DECLINE
Other companies have seen a more modest impact from their COVID businesses.
"We are not counting on Lagevrio as a driver of growth for our business," Merck Chief Executive Rob Davis said in an interview last week of 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 $5.7 billion from the treatment last year. Analysts expect that to drop below $1 billion this year. Merck had over $59 billion in total sales in 2022.
Eli Lilly and Co (LLY.N) made $2 billion in 2022 from monoclonal antibody COVID treatments and is not expecting any revenue from the business in 2023.
The U.S. Food and Drug Administration pulled its authorization of Lilly's latest antibody bebtelovimab in November because it was not effective against circulating Omicron subvariants.
"We did fine with COVID," 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."
Additional reporting by Khushi Mandowara in Bengaluru; Editing by Caroline Humer and Bill Berkrot
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Cite this: Drug Companies Face COVID Cliff in 2023 as Sales Set to Plummet - Medscape - Feb 07, 2023.