While COVID-19 gave the industry an opportunity for a reputational reset in 2020, the pandemic is now a net positive for the industry, according to the recent Moody’s report, “Solid demand, lift from COVID-19 products continue to drive positive outlook.”
While demand for COVID-19 vaccines has ebbed recently in the U.S., Moody’s projects strong vaccine sales overall for the remainder of 2021. Pfizer (NYSE:PFE) upped their guidance for vaccine sales to $26 billion in their first-quarter earnings report. “Their approach to guidance for revenue is based on contracts that have been signed,” said Michael Levesque, lead author of the report. Thus, any future contracts that Pfizer signs after that guidance update will further expand their guidance for COVID-19 vaccine sales.
Vaccine sales haven’t had a material impact, however, on Johnson & Johnson’s (NYSE:JNJ) bottom line for a few reasons. First, the company has vowed not to profit from the vaccine as long as the pandemic persists. In addition, the vaccine faced a temporary regulatory pause and manufacturing challenges in the U.S. But given their global presence, “they should still see material sales coming in during the year,” Levesque said.
While the pandemic had a varied impact on the pharmaceutical industry, the overall impact in terms of product sales was modest. “I would say it was within just a couple of negative percentage points,” Levesque said. Therapies that required administration in a provider’s office or onsite, however, saw a downturn — “especially in 2Q and 3Q 20.”
AstraZeneca (LON:AZN) still does not have authorization to sell its COVID-19 vaccine in the U.S., but globally, the product has found broad use.
The prospect of drug pricing reform is still a threat
It remains difficult to gauge the likelihood of drug pricing reform in the U.S. in the near term, but it remains “a credit risk sector-wide,” Levesque said. The risk is especially acute for companies with a high percentage of sales in the U.S. “But it’s an issue globally in many markets outside the U.S.,” Levesque said.
That said, drug pricing reform in many places outside of the U.S. is often easier to predict. “We already have a good sense of what the reforms look like because they’re pretty steady,” Levesque said. “They lead to things like a mid-single-digit pricing decline in places like Europe, where that’s been the case for many years.” Conversely, some of the drug-pricing reform proposals could have “a very material impact well in excess of the mid-single-digit decline,” according to Levesque.
If no drug pricing reform happens in the relatively near term in the U.S., that doesn’t mean it will subside. “The longer there’s no real change, the more that the pressure will continue to build,” Levesque said.
Cancer, autoimmune disease and rare disease remain ripe for innovation
The oncology sector has long been one of the pharma area’s bright spots. New drugs introduced in recent decades have had a material impact on cancer mortality. And yet, “even though there has been a lot of innovation and blockbuster immunotherapy drugs, there’s still a need for even more effective treatments that can improve survival for a greater number of patients,” Levesque said
Sponsors are experimenting with various approaches — exploring new indications for existing cancer drugs and testing novel drug combinations. “There’s also more focus on specific mutations that impact certain cancers,” Levesque said. “We’re seeing a lot of investment in drugs that may only be appropriate for 5% or 10% of patients, but the treatment can be quite effective for those patients.”
The penetration of drugs used to treat many autoimmune diseases remains at an early stage. Biologics, for instance, have shown considerable promise in treating psoriasis, but the market penetration of such drugs remains low.
Drug developers also continue to make progress in understanding the genetic underpinnings of rare diseases and developing products targeting them. “Because many rare diseases are so severe — and because they impact children in many cases — some of these drugs can command very high price points,” Levesque said. For that reason, rare disease is an area where the industry is willing to make R&D investments. “There is also potential in gene therapy, which can be a potential treatment for certain rare diseases in that area as well,” Levesque said. “So I think we’ll continue to see investment there.”