How will falling demand for Covid vaccines impact the pharmaceutical industry in 2023?

According to forecasts from the industry’s chief manufacturers, sales of Covid-19 vaccines and related medications are expected to slump in 2023. Forecasts from Moderna, manufacturers of Covid-19 vaccine ‘Spikevax’, is predicting a nearly $1bn loss due to a decline in sales.

Pharmaceutical giant Pfizer is also anticipating drastic losses due to a fall in sales of the Covid-19 Comirnaty vaccine and Paxlovid oral treatment. Pfizer expects a 64% drop in revenue in 2023.

After coming out on top in the race to produce the first wave of Covid vaccines, why are some of the most successful pharma firms in recent memory now set to struggle?

Why are vaccine and antiviral sales expected to fall?

The expected sales slump is set to be driven by the changing nature of the Covid-19 virus, and the battle to protect the world’s population against it.

Global vaccination rates have stagnated in recent months despite an abundant supply of the vaccine.  According to statistics collected by the New York Times 72.4% of the global population has now received at least one dose of a Covid-19 vaccine (as of 05/03/23).

Simply put, there is a significantly reduced demand for Covid-19 vaccines worldwide due to increased immunity and lower infection levels. Many nations have adopted an approach of ‘living with’ the virus and are even seeing less enthusiasm for booster shots.

ODDO BHF, a financial services group, has predicted that annual vaccination campaigns will now target ‘mostly vulnerable people largely above 60 years of age.’ This presents a drastically narrower scope for vaccine production and distribution.

Lee Brown from the business analytics group Third Bridge had the following analysis of the US:

‘Previously, consensus estimated the number of annual COVID-19 shots would approximate the number of annual flu shots, but now the US market could be as low as one-third the size of the flu market.’

How will this affect shares?

Forecasts for a fall in vaccine sales this year have seen share prices in most major vaccine manufactures tumble. Pfizer’s stock fell by roughly 15% as investment bank downgraded their stock price expectations.

Losses for Moderna came as the company reported trials of their new flu vaccine, designed to fill the gap left by falling vaccine sales, proved ineffective. The news saw Modern’s shares fall by more than 6% in trading.

Without government contracts providing a steady flow of income, manufacturers could see production and distribution costs rise. Increased overheads are also likely to hit profitability.

On the other hand, the opportunity for major producers to develop vaccines to combat new diseases may present new revenue streams. The developments could lead to a multi-product approach for companies like Moderna, Pfizer, and GSK.

Will drug prices be affected?

In the short-term, manufacturers look to be increasing their prices to offset any short-term losses. Executives at Pfizer had started as far back as February 2021 that they would be looking to ‘get more on price’ after the ‘pandemic pricing environment’.

In October of this year, Pfizer’s US President Angela Lukin stated during a call with investors that the price for individual shots is set to climb to around $110 – $130. The move is set to come once the company’s final supply contract with the US government comes to an end.

Additionally, Moderna executives signalled in September 2022 that prices for their vaccine doses were set to rise to $82 – $100 per dose.

The move represents a change in approach regarding vaccine sales, with producers now operating in a commercialised environment. Rather than being restricted by government contracts or pre-approved contracts, companies are now free to set their own prices.

A report by the Kaiser Family Foundation (KFF) a US non-profit organisation focusing on national health issues, had the following analysis of any potential price shifts:

‘Ultimately, the price for future doses is hard to know, and they could be higher than those implied by companies so far if new formulations are developed, or could come down if discounts are negotiated. Still, insurers and public programs will not have much leverage since they are generally required to cover all ACIP recommended Covid vaccines with no patient out-of-pocket cost.’

Industry experts have expressed their concerns that higher prices could deter uninsured or low-income individuals from becoming vaccinated.

How are manufacturers responding?

As mentioned earlier, producers are shifting gears in an effort to develop the next wave of world-beating vaccines. The contest to develop the world’s first effective vaccine for respiratory syncytial virus (RSV) is set to be the next key battleground in the pharma industry.

The market is estimated to be worth approximately $10.5bn over the next decade. Recently, Moderna shares jumped by around 7% in March after financial services firm TD Cowen stated that the company was set to be a ‘leader’ in the RSV market.

Cowen analysts led by Tyler Van Buren said:

‘It’s clear that mRNA vaccines could be disruptive to the traditional vaccine market as they can target complex antigens simply and with rapid, cell-free manufacturing that can lead to an approved product in record time. Moderna’s near-to-mid-term valuation is becoming less reliant on the emergence of new COVID variant epidemic waves, and more so on PCV, RSV, and flu.’

Additionally, both Pfizer and GSK signalled recently that they would soon be ready to launch their own RSV vaccines. Both companies are now awaiting regulatory approval.

2023 is likely to a challenging year for the pharmaceutical industry. With US drug prices reforms and the need to reposition in a post-pandemic world likely to create upheaval in the sector.

However experts remain confident that the pharma industry’s fundamentals remain strong and that its just a matter of time before a return to normality.