- Medicines soon to be approved will reduce Covid-19 hospitalisations in 2022, although supply will be tight.
- Companies will see significant revenues from these new products and larger profit margins than Covid-19 vaccines.
- Dozens of Covid-19 treatments are in clinical development with further approvals likely over the course of 2022.
Medicines that are soon to be approved will reduce Covid-19 hospitalisations in 2022, although supply will be tight. Building on the approval of Veklury (remdesivir) and dexamethasone in 2020, companies in 2021 announced results showing a leap in effectiveness against the disease. In October 2021, both Merck & Co and Pfizer announced results showing a significant reduction in hospitalisation following the administration of oral treatments. We expect strong sales from these medicines given easier administration and higher prices versus vaccines although we note that most countries will look to take a complementary approach, stocking medicines for treating unvaccinated patients and breakthrough infections. Similar to vaccines, however, supply will remain uneven with developed markets purchasing the bulk of initial volumes produced. Deals to expand supply through generic drug makers will begin to make a significant difference in global hospitalisations from 2022. We expect that further drugmakers will continue to announce results through 2022 and beyond that improve on effectiveness further.
|Company||Brand Name||Generic Name||Type||Reduction In||Approved|
|Merck & Co||Lagevrio||molnupiravir||Antiviral||0.3||Yes|
|Roche-||Ronapreve||casirivimab +||Monoclonal antibody||0.7||Yes|
|Eli Lilly||No brand||bamlaniviamab +||Monoclonal antibody||0.66||Yes|
|GSK-Vir||No brand||sotrovimab||Monoclonal antibody||0.85||Emergency|
|Biotech||name||Use Authorisation Only|
|AstraZeneca||No brand||AZD7442||Monoclonal antibody||0.67||Requested|
|Source: Company press releases, news sources|
Step change in treatment efficacy will make significant impact in 2022. In November 2021, Merck & Co (in collaboration with Ridgeback Biotherapeutics) and Pfizer announced results showing a significant reduction in hospitalisation following the administration of new experimental treatments. These oral antiviral treatments, Lagevrio (molnupiravir) and Paxlovid (PF-07321332 + ritonavir) work by interfering with the replication process of the SARS-CoV-2 virus and are therefore more likely to maintain efficacy against new variants with mutations in the spike protein. The treatments were able to show a 30% and 89% reduction in the risk of hospitalization or death respectively. Across populations with access to these medicines, this will make a significant difference in the prevalence of severe disease from SARS-CoV-2 infection. Both companies have filed for emergency use authorization and have started to reach advance purchase agreements (APAs) for delivery through 2022.
Focus will shift to broadening supply. Similar to the launch of Covid-19 vaccines, the challenge for these new treatments are now in the form of ramping up production to meet delivery timelines in soon to be reached APAs. Pfizer intends to manufacture 80mn courses in 2022 whilst Merck & Co plans to make 20mn courses. Although the treatments will not be needed in the same volume as Covid-19 vaccines, demand is still likely to outstrip supply throughout 2022 as Omicron fuels a fresh wave of infections and disease. Already the US government has reached APAs with Pfizer for 10mn courses of Paxlovid (for delivery over Q421 and Q122; deal value USD5.3bn) and Merck & Co for 3.1mn courses of Lagevrio (delivery by end 2021; deal value USD2.2bn).
However, we expect that, given the higher price and lower expected production compared with Covid-19 vaccines, supply inequality will be pronounced. As a mitigating factor for this, both companies have announced voluntary license agreements to allow the manufacture and sale of the medicines in approximately 100 low- and middle-income countries. This will help to broaden access; however, we expect many countries will be ‘stuck in the middle’ – unable to access generic versions and limited supply from Pfizer and Merck & Co.
Covid-19 treatments likely to be more profitable than vaccines. The supply deals with the US government indicate prices of USD530 and USD710 per course for Paxlovid and Lagevrio respectively. Although these prices will be difficult to maintain across other countries with lower income per capita, we expect that these treatments will be significantly more profitable than Covid-19 vaccines which are priced at a much lower level of around USD25 per dose, albeit with wider applicability. Consensus estimates which factor in discriminatory pricing and launch challenges on top of supply forecasts estimate sales of USD15.0bn and USD5.6bn for Paxlovid and Lagevrio respectively. However, these will not yet reflect a recent drop in the efficacy of Lagevrio in trials (to 30% from the interim analysis of 50%) nor concerns from the FDA's Antimicrobial Drugs Advisory Committee which voted 13-10 to recommend the authorisation of the product on December 1 2021. It is therefore likely that Paxlovid will dominate a greater share of the market.
Strong Revenue Growth Expected In 2022
Paxlovid & Lagevrio - Bloomberg Consensus Sales Estimates (USDbn)
f = Fitch Solutions forecast. Source: Bloomberg, Fitch Solutions
Further therapeutic candidates are in the pipeline. In addition to these treatments, further Covid-19 therapies are currently undergoing clinical trials that may enter the market in 2022. One of the main sources of new Covid-19 clinical trials is drug repositioning, with many companies investing in gaining new Covid-19 indications for existing drugs. One example is Avigan (favipiravir), which is already sold under several brand names in Japan for treatment of influenza. While the drug has undergone FDA-sponsored Phase II and III trials, it is not yet approved in the US or UK. The drug has however been shown to have some efficacy against Covid-19 as an RNA dependent polymerase inhibitor, and is currently undergoing clinical valuation, with data likely available in 2022. Furthermore, Arava (leflunomide) is also undergoing Phase III investigation for treatment of Covid-19. Originally developed for the autoimmune market, preliminary data has demonstrated Arava efficacy against Covid-19 due the drugs pyrimidine synthesis targeting mechanism. The drug was launched as a generic medicine by Sanofi in 2015 and is currently investigation by the UK NHS as a Covid-19 therapeutic, with trial results expected in July 2022.
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