(Bloomberg) — Covid-19 reshaped the health-care industry. The waning of the pandemic is reshaping it all over again.
Vaccine makers and pharmacy chains are seeing a steep decline in the number of people getting Covid shots. Makers of at-home rapid tests are going belly-up. Companies that made personal protective equipment have shut down.
When the coronavirus first emerged, companies across the health-care industry raced to reconfigure themselves. Pharmaceutical companies that were focused principally on cancer and rare diseases threw themselves into the pursuit of vaccines and antivirals. Medical-device makers developed at-home testing kits and quickly ramped up production.
That transformation is now unraveling. Pfizer Inc. — one of the biggest winners from the pandemic boom — on Monday offered one of the most dramatic signs of the turnabout, cutting $9 billion from its annual sales forecast because of declining demand for its Covid shots and the Paxlovid treatment.
“The weakening demand for the vaccine and Paxlovid goes to show this really is the transition to post-Covid,” said Max Nisen, an analyst at Bloomberg Intelligence. “People are going to have to figure out what that looks like well beyond Pfizer.”
Many Americans have put the pandemic behind them, and the US public-health emergency ended in May, but the virus hasn’t entirely gone away. New strains continue to circulate; while Covid hospitalizations remain far below their peak levels, in September they were the highest they’d been since March. Fewer and fewer people are working from home. Restaurants and airports are full.
Not every health-care business that faced sudden change because of Covid is hurting. More people are returning to their doctors for routine checkups and procedures they put off when clinics were crowded with virus patients. That has been good news for physicians and for hospitals.
Still, Pfizer’s decision to rein in its financial guidance shows how the landscape has changed, and it will put pressure on other companies that benefited from serving Covid patients to take another look at their expectations and make adjustments. Pfizer shares gained 3.6% on Monday.
Read more: Pfizer’s $9 Billion Covid Outlook Cut Sparks Investor Relief
Also on Monday, Pfizer rival Moderna Inc. reaffirmed its Covid vaccine sales guidance for 2023, but said it’s too early to accurately project where vaccination rates will land. Its shares declined 6.5%, hitting their lowest level since November 2020.
Moderna has said it expects vaccine sales of $6 billion to $8 billion this year. In a note to investors on Monday, William Blair analyst Myles Minter said he sees the company hitting the lower end of that range. Moderna has predicted that the US market this season will be at least 50 million doses, but Michael Yee, an analyst at Jefferies, expects it will be lower — between 35 million and 40 million.
Not long ago, Wall Street was excited about the potential for mRNA — the technology behind the Covid vaccines from both Moderna and Pfizer. Both companies bet that the breakthrough will have a range of applications, and rivals were under pressure to make mRNA moves of their own. However, the narrative has shifted, with investors pouring money into weight-loss drugs that some analysts are already predicting will have broad economic ramifications.
Read more: Weight-Loss Drugs Are Popping Up All Over Company Earnings Calls
So far this year, Pfizer shares are down 35%, and Moderna shares have tumbled 49%. By contrast, shares of Novo Nordisk A/S, the maker of the Ozempic and Wegovy drugs used for weight loss, are up 49% this year.
The rocky rollout of this season’s vaccine has made it harder to figure out how much demand there really is. Pharmacies have found themselves low on both Moderna’s and Pfizer’s new shots, forcing them to turn people away who were seeking the vaccines when they first became available this fall.
That has also hurt the drugstores. Walgreens Boots Alliance Inc.’s pharmacy and retail business has taken a hit from lower Covid-19 contributions. In the fourth quarter, Walgreens administered roughly 400,000 Covid-19 vaccinations, compared with 2.9 million shots the year prior, executives said on a call with investors. The company also saw a sharp drop in demand for Covid testing.
CVS Health Corp. has also faced headwinds. Its pharmacy and consumer wellness business generated an adjusted operating income of $1.4 billion in the second quarter, 17% lower than the prior year, mostly due to lower demand for products and services related to Covid.
Test Makers Tested
Vaccine makers aren’t the only ones seeing a decline in pandemic-related business. In February, Lucira Health Inc., a publicly traded maker of at-home Covid tests, filed for Chapter 11 bankruptcy protection. Test maker Ellume Ltd, which had clinched the first US clearance for its at-home Covid test kit, collapsed into liquidation in June.
Abbott Laboratories saw a rapid decline in Covid testing sales in 2022, a downturn that forced the company to cut temporary workers this year. Abbott’s Covid tests are expected to generate sales of just $1.3 billion in 2023, according to analyst estimates, well below the $7.7 billion tests racked up in 2021.
Unlike its smaller rivals, however, Abbott has other businesses that can offset that decline: Demand for medical devices like its diabetes monitors has cushioned the blow from dwindling Covid-related income.
For health insurers, the fading influence of Covid-19 has meant more people are seeking medical care. Patients postponed surgeries and other care during the pandemic, but insurance companies saw a rebound this year in joint replacements and heart procedures.
In June, a UnitedHealth Group Inc. executive suggested that medical costs were coming in higher than expected, sending health-insurer stocks tumbling. Managed care companies also face shrinking Medicaid membership, as millions who joined the safety-net health plans during the pandemic must now prove they’re still eligible for the program. Still, actual results from insurers have been better than investors feared.
For hospitals, surgery centers, and medical-device makers, patients coming back for more care is good for business. Labor costs spiked during Covid as hospitals depended on travel nurses and temporary medical staff, but those pressures have eased somewhat. Meanwhile, investor enthusiasm for virtual care has receded.
–With assistance from Fiona Rutherford, John Tozzi and Madison Muller.
©2023 Bloomberg L.P.