Will the pharmaceutical market reestablish itself as a safe option for investors in the new year?
Pharma investments have been disappointing in the recent past, but some experts believe the sector will start down the road to recovery in 2023. Read on to learn about the trends that will drive the industry in the next 12 months.
1. Pharma fundamentals strong, but recovery may take time
Like other industries, pharma faced financial frustrations and diminishing returns in 2022.
The ongoing effects of the COVID-19 pandemic, as well as ongoing pressure from Russia’s invasion of Ukraine, weighed on progress in the overall stock market and dampened the pharma sector’s performance.
It’s clear that investors haven’t had much to celebrate lately. How likely is that to change in 2023?
Encouragingly, experts continue to point to the strength of the pharma industry. “We cannot lose sight, especially in the life science sector, of the fact that the industry fundamentals are very strong. It will just take a matter of time before things get back to normality,” Subin Baral, EY’s global life science deals leader, told Pharmaceutical Technology.
Raj Lala, president and CEO of Evolve Funds, told the Investing News Network that Big Pharma generated significant revenue lines in 2022 thanks to vaccine production as the world continued to contend with COVID-19.
“Some healthcare companies lagged as non-emergency surgeries and procedures were delayed,” Lala said. “With the pandemic slowly moving behind us, the rescheduling of some of these elective procedures has helped the sector.”
In 2023, pharma stocks will also be affected by US politics. Given the split in Congress after last year’s midterm elections, it will be essential for investors to follow discussions on how pharma stocks may be impacted by the Inflation Reduction Act.
“The fallout of the (Inflation Reduction Act) remains hard to predict, and figuring out its longer term implications will be a big focus in 2023,” a report published by Evaluate Vantage indicates.
So far in 2023, early returns show names in the pharma sector struggling, at least for now.
2. M&A in the pharma sector looking strong in 2023
According to PwC researchers, mergers and acquisitions in the pharma space and other life science subsectors are expected to reach a collective value of US$225 billion to US$275 billion in 2023.
“Ample corporate cash, the need to continue to invest to address medium-term pipeline gaps and the resetting of biotech valuations will provide the backdrop for an active year,” said Roel van den Akker, the firm’s pharma and life science deals leader.
This activity will come after uncertainty ruled the sector in 2022, causing pharma deals to fall off during the year.
This year, individual transactions are expected to range from US$5 billion to US$15 billion.
However, PwC is also projecting one or two US$20 billion to US$40 billion deals “in the latter half of 2023 as companies gain more comfort around the (US) Federal Trade Commission’s posture in a period of divided government for the next few years.”
3. Drugs set to move the needle in 2023
According to Evaluate Vantage, investors should expect vaccines and monoclonal antibodies to lead 2023 revenue generation in the pharma market. The following drugs are expected to be the biggest sellers of the year:
- Keytruda from Merck (NYSE:MRK) at nearly US$25 billion.
- Comirnaty from Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) at nearly US$20 billion.
- Humira from Abbvie (NYSE:ABBV) and Eisai (OTC Pink:ESALF,TSE:4523) at nearly US$15 billion.
COVID-19 vaccines such as Comirnaty will continue to be some of the biggest money makers for the market, but there will still be uncertainty as to how the virus may change.
“Much still depends on what the virus does in the coming months or years, in terms of rendering existing treatments ineffective,” states Evaluate Vantage in its report.
Investor takeaway
The pharma world offers investors a vast set of opportunities, with options for those who want to take risks or make safer bets. In 2023, investors will have to be vigilant and keep an eye on how exterior forces affect market health and sentiment.
Don’t forget to follow @INN_LifeScience for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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