Covid stocks to face dropping valuations (PFE:NYE) (GILD:NYE) (MRNA:NSD) (BNTX:NSD) (MRK:NYE)

Covid Stocks to Face Pressure

Pharmaceutical companies that have profited from the COVID-19 pandemic are now facing a steep decline in revenue. Companies like Pfizer, BioNTech, Moderna, Gilead Sciences, AstraZeneca, and Merck & Co are estimated to have earned around $100 billion from COVID vaccines and treatments in 2022. However, this revenue is expected to fall by nearly two-thirds in 2023 due to overstocked inventories and declining demand as the world becomes more immune to the virus through vaccination and previous infections.

Unlike traditional drug and vaccine development, this sudden inflow of revenue is highly concentrated, which is putting pressure on these companies to make wise spending decisions. Morningstar analyst Damien Conover says the revenue drop should prompt these companies to make strategic deals and link up with new partners. BMO Capital Markets analyst Evan Seigerman suggests that companies like Pfizer should use their quick cash for transformative deals.

However, analysts are skeptical about the growth of COVID-19 revenue beyond 2023. JP Morgan analyst Chris Schott believes that COVID revenue will not grow in 2024 and beyond, and vaccination rates may even decline further. Moderna, which made $18.4 billion from its messenger RNA COVID vaccine in 2022, expects its revenue to fall sharply to around $7 billion in 2023. Some investors are frustrated with Moderna for not using its resources more effectively to prepare for declining revenue.

Other companies have seen a more modest impact from their COVID businesses. Merck, which reported sales of $5.7 billion from its antiviral pill, Lagevrio, expects this revenue to drop below $1 billion in 2023. Eli Lilly, which made $2 billion from its monoclonal antibody COVID treatments in 2022, is not expecting any revenue from the business in 2023. Eli Lilly CEO Dave Ricks says the company mostly reinvested its COVID profits in R&D, resulting in a record R&D spending year for the company.

In the bigger picture and outside of economic conditions, pharmaceutical companies that profited from the COVID-19 pandemic are now facing a sharp decline in revenue due to declining demand and overstocked inventories. The sudden inflow of revenue is putting pressure on these companies to make wise spending decisions and prepare for a future without COVID-19 revenue.

 

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