The standard response to any poor performance is to blame the supply chain, which has almost attained the status of a joke. However, it is now one of a serious group of interconnected economic headwinds that also includes the conflict in the Ukraine, COVID lockdowns in China, inflation, and the consequent increase in operational costs. Some businesses, particularly in Europe, are alerting investors to possible ramifications.
According to a European Big Pharma analysis from ODDO BHF analysts, AstraZeneca and GSK look to have weathered the external headwinds more effectively than most, with second quarter earnings results due in the coming weeks. For Roche, though, not so much. According to the team, AZ and GSK each ended the second quarter 7% higher than they had begun, while Roche had a 13% decline in market value.
As per ODDO, the pharmaceutical industry in Europe was generally less vulnerable to the adversities than other sectors. Companies in Stoxx HealthCare decreased by 5%, while those in Stoxx Europe 600 dropped overall by 10.5%. The analysts also predict favourable implications from the foreign currency market for Sanofi and Novo Nordisk.
Many businesses have issued warnings about the challenges the industry has been facing during the past few months. Executives from Bayer, GSK, and other firms concentrated on how inflation was affecting their profit margins in March. In May, Merck KGaA issued a warning to shareholders, saying that increasing volatility and uncertainty would cause the company to change its forecasts for the fiscal year 2022.
Markets then experienced a rumble two weeks ago when UCB announced that headwinds had led the business to lower its profit margin projection for the year from 26-27% to 21-22%. However, ODDO claimed that it hasn’t encountered the same gloom and doom in its regular conversations with pharma executives.
While UCB raised the alarm on the worsening macroeconomic environment, ODDO said that it has not noticed any companies adopting an alarmist tone in advance of the Q2 results.
Regarding the near future, ODDO stated that it is considering GSK’s reorganisation and anticipates an IPO for its consumer business Haleon on July 18, enabling the new GSK to concentrate on specialty pharma. Next, it will be Novartis’ chance to decide whether to sell, split, or keep its generics division, Sandoz. In a complex macroeconomic situation, the analysts said, they consider that the European pharma space should therefore carry on playing its defensive role, still preferring AstraZeneca and Sanofi.