With Pfizer, AZ and Merck leading the way, Big Pharma weathered the economic storm in Q2

Inflation. Supply chain issues. The Ukraine war. Rising interest rates. Pandemic lockdowns in China.  

Put them all together and you’ve got increased volatility and economic uncertainty that hindered many business sectors worldwide in the second quarter. But a look at the sales performance of top drugmakers shows that the biopharma industry is largely navigating those challenges.

Of two dozen top companies in the sector (see graph), 15 increased their revenue from the same quarter of 2021. More than half delivered sequential revenue increases from the first quarter of this year.

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A report last month from ODDO BHF showed that in Europe—where the economic headwinds were more protracted largely because of the Ukraine war—biopharma companies were less susceptible than others in the economy.  

Barbara Ryan, a senior Life Sciences advisor at Ernst & Young, helped explain why.

"Pharma stocks have benefitted from both their strong fundamentals, and exceptional balance sheets, as well as the current economic challenges and uncertainties," she wrote in an email. "Specifically, the defensive nature of the sector and scarcity of compelling investment opportunities have contributed to the group’s outperformance."

Unsurprisingly, the companies at the top and bottom of the second-quarter revenue rankings were those with COVID-19 products that are on the rise or in decline.

The biggest gainer year over year was Pfizer with a 47% increase, due almost entirely to sales of Paxlovid. Of Pfizer’s $8.84 billion increase in revenue from 2021, $8.12 billion came from the COVID oral antiviral. Meanwhile, Pfizer’s sales of COVID vaccine Comirnaty increased from $7.84 billion to $8.85 billion year-over-year. 

Despite Pfizer's success, the company’s COVID vaccine partner BioNTech went in the opposite direction, realizing a 40% drop in its year over year revenue from Comirnaty.

The company with the largest revenue tumble was no surprise. It came from Regeneron as sales of its COVID treatment REGEN-COV went from $2.59 billion in the second quarter of last year to $0 this year as it was shown to be ineffective against the omicron variant. As a result, during its earnings call, Regeneron said that it was pulling the plug on four clinical trials involving the antibody combo.

Still—as the company was quick to point out—its sales excluding REGEN-COV increased by 20% behind its powerhouse duo of Eylea and Dupixent.

Such are the ways that the sudden rise and fall of pandemic products can influence a company’s top line. Another example is Merck, which registered a whopping 28% increase in revenue thanks largely to $1.2 billion in sales of its COVID antiviral Lagevrio. But even excluding that performance, Merck’s other products rang up an 18% increase behind mega-blockbuster Keytruda, which hauled in $5.3 billion.

Another big gainer was AstraZeneca, which garnered a 32% revenue increase. While much of the rise can be attributed to the company’s absorption of rare disease specialist Alexion, AZ also is riding its diverse portfolio of blockbusters, especially its cancer drugs.

“Oncology generated Q2 revenue of roughly $3.7 billion, increasing 18% year-over-year and led by Tagrisso, Imfinzi and Lynparza, all of which posted double-digit growth,” Third Bridge analyst Lee Brown said. “Importantly, both Tagrisso and Imfinzi have attractive patent protection profiles.”

The overall performance led AZ to increase its guidance for the year, predicting revenue growth of more than 20% instead of the high teens.

There were several companies that made impressive gains without the help of a COVID product. With a 27% increase year over year, Novo Nordisk is in high gear behind its diabetes and obesity drugs. Additionally, Vertex was up 22% on the strength of its cystic fibrosis franchise, which Brown believes will continue to grow.

“Strong uptake is expected to continue due to increased market adoption of Trikafta in the U.S. and launches of Kaftrio across international markets,” said Brown, who also pointed to Vertex’ investigational triple CF combination drug which could hit the market in the next few years.

Also noteworthy were the year-over-year gains of the European foursome of GSK (19%), Bayer (18%), Sanofi (16%) and Boehringer Ingelheim (14%). GSK and Bayer are thriving after fending off threats of investor upheaval and using differing strategies. While GSK has spun out its consumer business as Haleon, Bayer as resisted calls to do the same.

As for the future, Pfizer’s growth will have to slow with the inevitable decline of its pandemic products. But Brown believes the company has set itself up for long-term success with its recent M&A moves.

“The announced acquisition of Global Blood Therapeutics for $5.4 billion is expected to close in Q4 of this year and provides Pfizer a foothold in the treatment of sickle-cell disease,” Brown said.

He also cited Pfizer’s $11.6 billion buyout of Biohaven, which brings the “deal’s crown jewel,” migraine drug Nurtec ODT. On top of that, Brown added that Pfizer’s $6.6 billion buy of Arena Pharmaceuticals brings a “portfolio of diverse and promising development-stage therapeutic candidates in gastroenterology, dermatology and cardiology.”

As for the industry overall, Ryan believes it is built to resist the short-term fluctuations of the economy and is set up for increased growth over the next several quarters.  

"Industry fundamentals are generally strong, with unit growth and pricing power, record new drug approvals, solid pipelines, and strong balance sheets," Ryan wrote. "There is record firepower to fund business development, always a key pillar of growth strategies. M&A was highlighted as a key priority for the companies across the board and it is expected to continue to accelerate."