COVID-19 and the Pharmaceutical Industry [Kochański & Partners report]

3 July 2020 | Knowledge, News

International investment capital will flow to companies capable of developing a cure for COVID-19. However, the Polish pharmaceutical sector, contrary to earlier expectations, has been experiencing serious declines compared to pre-coronavirus pandemic quotations.

 Surprising declines

Although global pharmaceutical companies have responded relatively mildly to COVID-19, the Polish sector has been experiencing heavy declines, reaching 50% in mid-March, compared to the values at the beginning of the year. There are also no prospects for a rapid recovery from the crisis – by early June, the losses were reduced to 28%.

The difficult situation of Polish companies is largely due to a decrease in the number of pharmaceutical products purchased, resulting from patients limiting their visits to pharmacies and medical facilities for fear of coronavirus infection. The crisis in the sector is also fuelled by the collapse of the global supply chain, since many medical components were delivered to Poland from China and Italy.

Vaccine race

The limited potential for developing a coronavirus vaccine is one of the main causes of the crisis in the Polish pharmaceutical market. A rapid introduction of a cure for COVID-19 is one of the greatest challenges faced by the global pharmaceutical sector in the age of pandemics. The first company to reach this goal will experience a dramatic increase in revenue at previously unimagined levels. Investors around the world are thus investing heavily in those companies which they consider closest to developing the vaccine. Gilead Sciences, U.S., openly reporting on progress in vaccine development, recorded a stock market value surge at the beginning of the pandemic. However, investors had to quickly tone down their optimism. The observed change in the company’s valuation suggests that the inflow of capital is rather speculative. JP Morgan downgraded Gilead Sciences shares in early May to neutral.

U.S. and German recovery

Compared to Poland, the situation of the U.S. drug sector is quite optimistic. The pharmaceutical index was systematically recovering to reach 2.9% after falling by 24.5% in the second half of March. The positive trend is due to the high technological potential of U.S. companies, enabling them to meet the dynamically changing needs of consumers. One example may be Pfizer recording a jump in revenue from sales of a vaccine against pneumonia in recent months.

The long-term development prospects for the U.S. pharmaceutical industry will depend, however, on stabilizing relations with China, one of the United States’ main business partners.

The German pharmaceutical sector saw stock market indices reacting to the pandemic similarly to the U.S. indices, reaching the value from the beginning of the year following a decline of 28% in June. The COVID-19 pandemic, however, has exposed Germany’s strong dependence on the global supply chain – the sudden closure of borders revealed a problem with access to medicines in the local market.

 

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