Market News

Pharma Industry Could Benefit from Rise in Medicine Spending

According to an industry report from the drug analytics and contract research organization IQVIA Holdings (IQV), global expenditure on medicine is likely to reach $1.9 trillion by 2027, increasing in the range of 3% to 6% every year.

The above expenditure on medicine is “the amount spent purchasing medicines from manufacturers before off-invoice discounts and rebates.” This projection excludes the spending on COVID-19 vaccines and therapeutics.

According to the report, the COVID-19 pandemic has deeply impacted the pharma industry and is expected the expand the pharma market by $500 billion between 2020 and 2027.

COVID-19 vaccines developed by pharma companies like Pfizer (PFE) and BioNTech (BNTX), and Moderna (MRNA) approved by the U.S. FDA have been widely administered in the U.S. Currently, these vaccines are available free to everyone in the U.S. due to the Federal Government’s purchase plan for these vaccines.

However, there have been reports that these pharma giants are contemplating hiking the prices of their COVID-19 vaccines in the range of $110 to $130 per dose after they become available on the commercial market later this year.

Earlier this month, top-rated Wells Fargo analyst Mohit Bansal downgraded the stock citing earnings headwinds for the stock and expecting a “COVID reset”.

Bansal downgraded PFE stock to a Hold from a Buy and lowered the price target to $50 from $54. The analyst’s price target implies an upside potential of 11.2% at current levels.

The analyst, however, remained positive about PFE’s growth over the long term as it has projected a compounded annual growth rate of more than 6% between 2025 and 2030 as a result of pipeline expansion and M&A activity.

Besides Bansal, other analysts are cautiously optimistic about PFE stock with a Moderate Buy consensus rating based on three Buys and seven Holds.

Johnson & Johnson (NYSE:JNJ) is another healthcare giant which is scheduled to announce its fiscal Q4 results today and its pharmaceutical division could benefit from the surge in medicine spend.

JNJ stock has increased by around 6% in the past year.

As the United States has seen a surge in COVID-19 cases as a result of the new contagious Omicron subvariant XBB.1.5., Abbott Laboratories (NYSE:ABT), the manufacturer of COVID-19 rapid antigen tests could benefit.

Analysts are bullish about ABT stock with a Strong Buy consensus rating based on five Buys and one Hold.

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