COVID-19 has reshaped the healthcare industry. The waning of the pandemic is reshaping everything again.
Vaccine manufacturers and pharmacy chains are seeing sharp declines in the number of people getting COVID-19 shots, manufacturers of rapid at-home tests are going bankrupt and companies that make personal protective equipment have shut down.
When the coronavirus first emerged, companies across the healthcare industry scrambled to reorganize themselves. Pharmaceutical companies, primarily focused on cancer and rare diseases, work to develop vaccines and antiviral drugs. Medical device manufacturers developed at-home test kits and quickly ramped up production.
That shift is now unraveling. Last week, Pfizer – one of the biggest winners from the pandemic boom – provided one of the most dramatic signs of a turnaround, pushing back its annual sales amid falling demand for its COVID-19 vaccine and Paxlovid treatment. The forecast was slashed by $9 billion.
“Weak demand for vaccines and Paxlovid suggests that this is really a transition to post-COVID,” said Max Nisen, an analyst at Bloomberg Intelligence. “People are going to have to figure out what’s going on beyond Pfizer. what does it look like.”
Many Americans have put the epidemic behind them, and the U.S. public health emergency ended in May, but the virus has not completely disappeared.
Not all healthcare businesses facing sudden changes due to the coronavirus pandemic have been hurt. More people are returning to doctors for routine checkups and surgeries, which they have put off as clinics are overwhelmed with virus patients. This is good news for doctors and hospitals.
Still, Pfizer’s decision to rein in financial guidance signals a changing landscape that will put pressure on other companies that have benefited from serving COVID-19 patients to reexamine their expectations and make adjustments.
Also on Monday, Pfizer rival Moderna reiterated its COVID-19 vaccine sales guidance for 2023 but said it was too early to accurately predict a decline in vaccination rates.
Moderna said it expects vaccine sales to reach $6 billion to $8 billion this year. William Blair analyst Myles Minter said in a note to investors on Monday that he expects the company to hit the lower end of that range. Moderna predicts there will be at least 50 million doses of its vaccine in the U.S. market this quarter, but Jefferies analyst Michael Yee expects the number to be lower — between 35 million and 40 million doses.
Shift of focus
Not long ago, Wall Street was excited about the potential of mRNA, the technology behind the COVID-19 vaccines from Moderna and Pfizer. Both companies believe the breakthrough will have a range of applications, while rivals are under pressure to launch their own mRNA initiatives.
However, that has changed, with investors pouring money into diet pills and some analysts already predicting they will have widespread economic impact.
This year, Pfizer shares are down 35% and Moderna shares are down 49%. By comparison, shares in Novo Nordisk, maker of the weight loss drugs Ozempic and Wegovy, rose 49%.
The vaccine rollout has hit a snag this season, making it harder to figure out just how much need there is. Pharmacies are finding low supplies of the new vaccines from Moderna and Pfizer, forcing them to turn away people seeking them when they first become available this fall.
This also hurts pharmacies. Walgreens administered about 400,000 COVID-19 vaccines in the fourth quarter, compared with 2.9 million in the same period last year, executives said on a conference call with investors. The company has also seen a sharp drop in demand for coronavirus testing.
CVS also faces headwinds. Its pharmaceutical and consumer health business reported second-quarter adjusted operating income of $1.4 billion, down 17% from the same period a year earlier, primarily due to lower demand for coronavirus-related products and services.
Tested by the manufacturer
Vaccine makers aren’t the only ones seeing pandemic-related business declines. In February, Lucira Health, a publicly traded manufacturer of at-home coronavirus tests, filed for Chapter 11 bankruptcy protection. Test maker Ellume, whose home coronavirus test kits were first licensed in the U.S., went into bankruptcy in June.
Abbott Laboratories’ coronavirus test sales fell rapidly in 2022, a slump that forced the company to cut temporary workers this year. According to analyst estimates, Abbott’s new crown testing product sales are expected to be only $1.3 billion in 2023, far lower than the $7.7 billion in sales in 2021.
Unlike smaller rivals, Abbott has other businesses that can offset the decline: Demand for medical devices like diabetes monitors has cushioned the blow from coronavirus-related revenue losses.
For health insurers, the waning impact of COVID-19 means more people are seeking medical care. Patients have put off surgeries and other care during the pandemic, but insurers are seeing a rebound in joint replacement and heart surgeries this year.
In June, a UnitedHealth Group executive said health care costs were higher than expected, sending shares of the health insurance company tumbling. Managed care companies also face declining Medicaid memberships, as millions of people who signed up for safety-net health plans during the pandemic must now prove they remain eligible for the program. Still, insurers’ actual results were better than investors feared.
For hospitals, surgery centers and medical device manufacturers, having patients come back for more care is good for business. Labor costs have soared during the coronavirus pandemic as hospitals rely on travel nurses and temporary medical staff, but those pressures have eased. Meanwhile, investor enthusiasm for virtual health has faded.