The pharmaceutical industry and the pandemic
Supporters of the conspiracy theory are absolutely sure that the coronavirus was bred on purpose so that pharmaceutical companies could earn extra billions. Even among those who consider this foolish, the majority of people have no doubt that the pandemic will make the enterprises that produce medicines rich. Now, with the consequences of the ongoing COVID-19 pandemic hurting the entire economy, pharmaceutical companies are seen as among the few who benefit. This is logical. Isn’t it?
Source: ourworldindata.org
"Golden time" for medicine and pharmaceutical industry. Arguments for"
Already at the beginning of the year, the spread of COVID-19 affected companies’ stock prices. After the WHO declared the coronavirus outbreak an international emergency on January 30, the stocks of mask and chemical protective equipment manufacturers grew the most - Allied Healthcare (+27%), Lakeland Industries (+5.18%), Alpha Pro Tech (+5%), 3M ( +1.57%).
At the same time, shares of biopharmaceutical companies that produce antiviral drugs and develop vaccines also grew in price - Vir Biotechnology (+4.72%,), Novavax (+2.34%).
Inovio and Moderna, which announced the development of anti-covid vaccines, grew by 13.38% and 2.14%, respectively.
It is also worth noting that not only companies whose activities are directly related to the fight against coronavirus have grown, but also those whose portfolio contains drugs for the treatment of anti-colds and antiviral diseases, which can also be used in the treatment of COVID-19.
Source: ourworldindata.org
What can go wrong?
It is curious that while the shares of small pharmaceutical companies Vir Biotechnology and Novavax soared against the background of news from WHO, the reputable Johnson & Johnson, on the contrary, lost 0.12%. Perhaps the whole point is that the representative of the company, speaking about the development of a vaccine, admitted that it could appear only within a year.
And here we can see one of the reasons for skepticism about the windfall revenues and the rapid growth of medical companies. Winner take it all - only the first can get all the cream. Research and development costs are now huge for all companies involved in the process.
Moreover, there is no guarantee that all research will be successful. We can spend a lot of effort and money developing vaccines that will end up being ineffective. In general, the invention of the vaccine seems like a groundbreaking event that can make money, but the risks of losing are also high.
Another important factor is the social significance of the issue. The planet is facing a very serious threat. To solve this problem, including the development of medicines for the treatment of the virus, huge funds are directed from governments, international funds and organizations. Therefore, pricing will depend not only on manufacturers. Surely, regulators will not allow companies to be guided during a pandemic solely by commercial interests.
Source: ourworldindata.org
What to expect from the future
Of course, against the background of other sectors of the economy, the forecasts for biopharma are much rosier. But at the same time, expecting super profits is too optimistic. Most likely, a sharp increase on the background of news at key moments (announcement of the beginning of a pandemic, sooner or later announcements about the creation of an effective vaccine and drugs for treatment) will then be smeared with a thin layer. On the scale of a year, let alone two or three, this growth will not look incredible.
It has not yet been success that has led to a significant increase in value, but the expectations of the success by pharmaceutical companies. Further, these optimistic forecasts may come true for some players, which will no longer lead to such a large increase. And not for everyone.