Laggard pharmaceuticals could be about to receive a post-pandemic booster shot. The actions of GlaxoSmithKline, Novartis or Sanofi have suffered during the confinements, as routine procedures and treatments have been postponed. But with the economic reopening they should recover.
The health sector has had its share of winners for Covid, such as Moderna. But some of the biggest names suffered as people avoided hospitals and mixed less, reducing new diagnoses and the transmission of illnesses like the flu. Shares of GSK, Novartis and Sanofi are down an average of 18% since January 2020, compared to the flatness of the Stoxx Europe 600 Health Care.
Some flagship products have done especially badly. Novartis saw its revenue from breast cancer drugs, such as Afinitor, fall almost 30% throughout 2020. Sales of GSK’s vaccine unit, which had grown 21% in 2019 thanks to a new contra shingles, Shingrix, were down 2%.
But the sharp falls in the stock market probably exaggerate the damage. Sanofi, which saw sales for its general drug business plummet by 8% in 2020, was helped by booming demand for its eczema treatment Dupixent. The group’s global revenues were flat for the year. The turnover of Novartis and GSK was even up 2.5% and 1% respectively.
With the reopening, people will be more willing to seek treatment. They will also need to catch up on eye and cancer screenings. Novartis’ net income is projected to rise nearly 8% in 2021, and Sanofi’s 5.5%; and that GSK’s profits grow 13% in 2022 after two years of decline.
GSK, Sanofi and Novartis are trading on average at 13 times future earnings, compared to 15 at the end of 2019. If priced at their prepaid forward multiples, their combined $ 423 billion capitalization would increase 17%, we estimate. That recovery can come quickly.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, of Carlos Gomez Down, it is the responsibility of Five days
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