Pharma Outlook 2022: Market Still Feeling Lingering Pandemic Effects

Pharma outlook 2022: Large- and small-cap stocks diverge

In preparing their 2022 report on the biopharma space, researchers at Evaluate Vantage found that the “share price performances of large and small cap drug developers diverged over the course of 2021.”

According to the writers, this trend will continue into 2022.

In their report, they point to the performance of the SPDR S&P Biotech ETF (ARCA:XBI) and the Health Care Select Sector SPDR Fund (ARCA:XLV), which operate as benchmarks for the industry and small-cap biopharma stocks.

“The pandemic outbreak and swift recovery staged by healthcare stocks is clear in this chart, with the smaller groups in the XBI being propelled into bubble territory,” the report states.

With that bubble now burst, the pharmaceutical space is now believed to be in a bear position. But in the long run this could indicate a more stable level for small caps in the space.

“The declines this year are from heady heights, and many hope that a retreat in valuations will persuade buyers back to the table,” the report from Evaluate Vantage notes.

Pharma outlook 2022: Next big drugs could focus on oncology and Alzheimer’s

A report from the IQVIA Institute for Human Data Science shows oncology and immunology remain the two leading global therapy areas. Each is expected to grow at least nearly 10 percent by 2026. Other areas of interest in the market include diabetes, autoimmune disorders and therapies for Alzheimer’s and Parkinson’s.

“While COVID-19 has garnered the most attention in the two years, the vast majority of patients with other diseases will need to work around social disruptions to receive care,” the report reads. “Major advances are expected to continue, especially in oncology, immunology and neurology.”

The researchers at Evaluate Vantage expect to see several developments in the Alzheimer’s space, specifically from Eli Lilly (NYSE:LLY) and Roche (OTCQX:RHHBY,SWX:ROG).

Beyond big-name companies, the report points to projects from Mirati Therapeutics (NASDAQ:MRTX) and Reata Pharmaceuticals (NASDAQ:RETA), which are focused on lung cancer and kidney diseases treatment, respectively.

However, smaller names in the space can be less safe for investors. “Setbacks can never be ruled out for any project, but those owned by small developers should probably be considered high risk,” the report explains.

Overall spending in medicine continues to provide results for companies in the pharmaceutical space.

“The global medicine market — using invoice price levels — is expected to grow at 3-6 (percent) CAGR through 2026, reaching about US$1.8 trillion in total market size in 2026, including spending on COVID-19 vaccines,” says the report from the IQVIA Institute for Human Data Science.

Pharma outlook 2022:  Biggest drugs in the world set to move the needle

The attention COVID-19 demands has allowed investors to enjoy the returns of vaccine treatments.

Evaluate Vantage expects that combined revenue from the Pfizer (NYSE:PFE), BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA) vaccines will reach at least US$50 billion in 2022.

Outside COVID-19 treatments, the data continues to point to Humira, a drug from AbbVie (NYSE:ABBV), as the top-selling drug in the world. Humira is expected to bring in just over US$20 billion in 2022.

However, this may be the last year for Humira’s dominance as competitors are expected in 2023. In 2021, a congressional probe found AbbVie’s status as a top drug maker was aided in large part by price hikes to key drugs.

Here are the top companies by sales numbers, according to Evaluate Vantage:

• Pfizer — Nearly US$70 billion
• Abbvie — Shy of US$70 billion
• Johnson & Johnson (NYSE:JNJ) — Just over US$50 billion
• Novartis (NYSE:NVS) — Over US$50 billion
• Bristol Myers Squibb (NYSE:BMY) — Nearly US$50 billion
• Roche — Nearly US$50 billion
• Sanofi (NASDAQ:SNY) — Over US$40 billion
• Merck & Co. (NYSE:MRK) — Over US$40 billion
• AstraZeneca (NASDAQ:AZN) — Just over US$40 billion
• GlaxoSmithKline (NYSE:GSK) — Over US$30 million

Pharma outlook 2022: Investor takeaway

It’s a time like no other for pharmaceutical investments; the level of interest in the space from the capital markets has never been stronger as the companies seek solutions to the global problem of COVID-19.

Even so, pharmaceutical investments may face a slide given the extreme highs experienced at the onset of the pandemic. But experts see this as a healthy sign for this space.

“After years of plenty the drug development sector is, for the most part, in a good place ... The highs of the pandemic era could never be maintained, and many consider the current retrenchment part of the cycle,” the Evaluate Vantage researchers wrote in their report.