Rewind just one year, and it seemed reasonable to assume that Covid-19 would transform the outlook for big pharma.
Three safe and effective vaccines have been developed in one year; regulators worked at record speed to get them approved, and governments pre-purchased millions of doses to ramp up production — perhaps the same would happen for a whole range of other diseases.
Investors began pumping money into both established giants and biotech start-ups on the promise that the industry was about to enter a new golden era.
What went wrong?
Certainly, a lot of money has been made in the last two years. Pfizer’s most-used jab was a blockbuster, generating annualized sales of $37 billion, nearly doubling its revenue and making the jab the biggest pharmaceutical product in the world. Moderna and AstraZeneca didn’t earn as much, but still achieved nine-figure revenue for their vaccines.
And yet, despite this, there are not many signs that progress can be sustained – the share prices of many of the major players have fallen. Granted, the broader stock market has also been weak, particularly for innovative tech-based companies, but even so there is no escaping the fact that Covid-19 is not turning into a catalyst for rapid growth. in industry. No one makes a fortune with Covid-19 anymore.
There were three big problems. First, the Omicron variant was more infectious, but at least somewhat milder than the Delta variant, and it only partially escaped existing vaccines. There was almost no way to prevent its spread, but fortunately very few vaccinated people who caught it required hospitalization. Of course, it was always a good idea to get vaccinated and get a booster as well, but the demand for vaccines inevitably started to decline. Flu shots are a major commodity, but in reality most people don’t care because they don’t worry about catching it. As 2022 unfolded, Omicron meant that Covid-19 began to follow the same path.
Second, vaccination kills its own market. It is a paradox of vaccine development and manufacturing that the more successful they are, the less demand there is. At the most extreme level, the disease is completely wiped out, so no one has to worry about it anymore: polio has been largely eliminated from the developed world, and measles and mumps have been tamed. Some of the pharmaceutical companies are pushing for an annualized vaccination against Covid-19, especially for the elderly or vulnerable, but it’s starting to look like two or three shots will be enough. Almost all of us have been vaccinated now, which means there is no more demand.
Too greedy for their own good
Last but not least, the firms were too greedy. The AstraZeneca Oxford vaccine was the obvious exception, sold at cost, but Moderna and Pfizer both pushed very high prices, charging health systems up to $30 per vaccine.
This now appears to have been a critical error; rich countries could afford it, but vaccines were unaffordable for many others, and countries relied on local alternatives or opted for herd immunity instead. Worse, it has fueled demands that companies be stripped of patent protection. It would have been much better to charge only two or three dollars per injection and to ensure that the whole world was vaccinated. Instead, companies prioritize short-term profits over building a long-term business.
The virus could rebound. Hong Kong is in the midst of a large-scale outbreak and there are signs it is spreading across mainland China. If China would agree to admit that its own vaccines were not very effective and instead order the shots from Pfizer or AstraZeneca, that would revive the market. Otherwise, the boom died out. The pharmaceutical industry may have imagined that it was going to make a fortune from the virus and start a new golden era of innovation. It didn’t work out that way – and the industry seems stuck with modest growth at best for a long time to come.